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NTMA will have €30bn cash for new government

Spending boost for incoming coalition despite Covid-19 crisis

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Purse strings: Fianna Fáil’s Micheál Martin will have spending power as Taoiseach if the deal is approved. Photo: Gerry Mooney

Purse strings: Fianna Fáil’s Micheál Martin will have spending power as Taoiseach if the deal is approved. Photo: Gerry Mooney

Purse strings: Fianna Fáil’s Micheál Martin will have spending power as Taoiseach if the deal is approved. Photo: Gerry Mooney

The National Treasury Management Agency (NTMA) will have around €30bn in cash available at the end of the month, when the incoming Government is expected to take office, according to the head of the agency.

An additional €2bn due to be paid by Nama within weeks, with more to follow, along with cash left over from the liquidation of the former Anglo Irish Bank, will also be available for spending as it arrives into the Exchequer, under the new Programme for Government.

The cash at the NTMA includes funds to cover the expected cost of running the State, money to pay bonds as they fall due and a huge €10bn so-called cash buffer that can be drawn on as needed.

The incoming Government's ability to spend is set to be boosted by windfall income of around €5.25bn in surpluses from the winding-up of Nama and the liquidation of IBRC. That money had been earmarked for use to reduce the national debt, under commitments dating back to the EU/IMF Troika and under EU budget rules brought in after the crash.

However, the European Union's so called fiscal rules have been relaxed for all member states as a result of the Covid-19 crisis, freeing up cash from so-called windfalls to be used essentially as governments see fit.

Finance Minister Paschal Donohoe said yesterday that spending cash windfalls makes sense when the alternative would be to increase borrowing.

The scale of financial resources available despite the jobs crisis and the economic crash resulting from the Covid-19 lockdown were confirmed yesterday when the NTMA published its annual report.

The €30bn in cash it will have available is a result of a sharp rise in borrowing since the start of the lockdown. The €13.5bn borrowed on the markets in the past three months is around what is normally raised in a year.

While debt is cheap for now, NTMA chief executive Conor O'Kelly said Ireland is well regarded by lenders and supported by the European Central Bank's policies but he warned the rising national debt will leave Ireland exposed to rising interest rates down the line.

"From a borrowing perspective, because of our current credit rating, because of our current refinancing requirements, and because of the current interest rate environment, we are not worried about the next four years. It's the 10 years after that we need to keep an eye on and begin planning for," he said.

So far in 2020, the NTMA has borrowed €18.5bn on the financial markets, of a likely €20bn to €24bn in the full year. Average yields, the effective cost of the debt per year, are 0.3pc and the average maturity is 11 years.

Those low interest rates on the bond market were a huge boon to the last Government. In the past five years Ireland's interest bill has fallen from €7.5bn to circa €4bn for this year, even though the total debt increased. That saving, combined with a sharp rise in the level of corporation tax paid over the same period, allowed the outgoing Coalition to continually boost spending without having to raise new taxes or find alternative sources of income until the Covid-19 outbreak.

Corporation tax receipts increased further in May and are now expected to continue to grow in 2020.

Irish Independent