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NTMA ready to spend its cash as tax take reduces borrowing needs

Government borrowing needs this year from markets will be just €10bn, half the level of 2021 

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Finance Minister Paschal Donohoe is sitting on a €5bn surplus so far this year

Finance Minister Paschal Donohoe is sitting on a €5bn surplus so far this year

Finance Minister Paschal Donohoe is sitting on a €5bn surplus so far this year

The National Treasury Management Agency (NTMA) is planning to spend down more than €6bn of its cash reserves this year instead of relying on new debt as Government borrowing needs plummet.

The agency has told bond investors that it is using €6.3bn in cash this year to help cover bond redemptions, exchequer borrowing and general contingencies.

It is also set to issue a modest total of €10bn in new debt by the end of the year – just half of 2021’s total and at the bottom of its issuance range – according to the agency’s latest presentation for institutional investors.

The reliance on more cash and less debt means the NTMA can reduce the State’s debt while covering new borrowing requirements.

The NTMA cancelled a scheduled auction of treasury bills yesterday citing the “strong fiscal position as reflected in the recent exchequer returns”.

It was the second such cancellation this year. In June the NTMA nixed a €1.25bn bond auction citing a shrinking Government deficit and robust cash balances of €27.5bn.

Now the agency is putting that cash to work to retire old debt and meet the Government’s shrinking borrowing requirements.

On Wednesday the Department of Finance reported a €5bn exchequer surplus for the year to date, putting the State’s finances well ahead of the department’s own forecast of a modest surplus by the end of the year.

Last month Finance Minister Paschal Donohoe announced there would be a €6.7bn cost-of-living package included in the next Budget.

The strong performance in tax receipts and lower-than-expected spending on Covid-19 has already slashed the Government borrowing requirement this year from €7.7bn to just €1.1bn, making it safe to spend some of the cash built up during a decade of low interest rates.

The NTMA has raised €5.75bn this year via bond auctions, putting it on track to make the €10bn target by year end.

The agency’s extension of debt maturities and a reduction of overall interest rates has won upgrades from three of the four major ratings agencies, signalling a positive outlook for the State’s financial profile.

The NTMA warned that a slowing recovery could pose challenges for finances, noting that “sustained inflation is an obvious risk”.

The agency said the next few quarters would be “critical” in deciding whether Ireland enters a “wage-price” spiral that could embed high inflation expectations.

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