Wednesday 17 January 2018

Early payment of €4.1bn debt puts dent in State cash pile

The National Development Finance Agency os part of the National Treasury Management Agency
The National Development Finance Agency os part of the National Treasury Management Agency
Donal O'Donovan

Donal O'Donovan

The State's cash pile could drop as low as €16bn heading into the end of the year after a portion of the money was used to redeem bonds early.

That total was set to reduce to €20bn by year end -- down from €25bn in November.

However, the Government yesterday repaid €4.1bn of bond debt early, a surprise move that will reduce the national debt at the end of the year -- but also means less cash in the National Treasury Management Agency (NTMA) coffers at the end of 2013.

The NTMA declined to say what the price size of the cash pile stood at last night.

The total cash pile can change based on the rate that tax is being paid in at, or on how quickly government departments are spending cash.

Last month ministers said the then €25bn cash pile built up by the National Treasury Management Agency was one reason behind the decision to exit the bailout without a so-called "precautionary credit line" from Europe.

The cash pile is made up of money raised on the markets through bond deals early in the year, tax receipts and rescue loans drawn down under the bailout.

The NTMA announced the offer to 'buy back' up to €6.85bn of government bonds due to be repaid in January 15 yesterday.

It paid a small premium over face value to take back the debt early from willing sellers.

By the close of the one-day offer, €4.102bn of the debt had been redeemed -- or paid off ahead of schedule.

"A debt buy-back prior to year-end will decrease the forecasted debt to gross domestic product peak," bond trader Ryan McGrath said.

He estimated that the European Central Bank held between €1.5bn and €2bn of the Irish bonds after interventions in the markets in recent years, and would prove a willing seller.


The State still has enough cash set aside to meet the cost of running the Government and repaying debt until into the start of 2015, because the €4.1bn paid off yesterday would have had to be repaid in January from the same €20bn fund anyway.

Careful husbanding of the national debt has become a big priority for authorities since the burden has increased to around 120pc of the size of the economy thanks to bank rescues and budget deficits since the crash.

Too much cash held by the NTMA means taxpayers must pay more in interest, too little and there are risks the country would be hit if a fresh outbreak of the euro crisis damaged access to the debt markets.

Irish Independent

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