Government debt to peak at 95% of GDP, says NTMA chief

THE GOVERNMENT’S debt will peak at about 95 per cent of GDP in 2012-2013, including the one-off cost of the bailouts of Anglo Irish Bank and Irish Nationwide, the head of the Government’s debt management agency has said.

John Corrigan, chief executive of the National Treasury Management Agency (NTMA), said it had “flagged” with rating agencies and investors the possible increase in the Government deficit to 20 per cent of GDP when the State injected €4 billion in cash into Anglo last year. “That was a trailer of likely possibilities,” he said.

He said that State funds of up to €25 billion pledged to Anglo and Irish Nationwide may be classed as part of the country’s deficit this year and that a final decision on this would be made in September.

The Government has committed €10.3 billion in capital to Anglo this year – on top of the €4 billion in cash injected last year – while some €2.7 billion has been pumped into Irish Nationwide. Anglo will require another €8 billion as it sells loans to the National Asset Management Agency.

Mr Corrigan said that sovereign debt investors were “quite comfortable” that new issuances of €2 billion to €3 billion a year to cover the promissory notes to Anglo and Irish Nationwide was “perfectly manageable” over 10 years.

The Exchequer is fully funded until the first quarter of 2011, said Mr Corrigan, and the NTMA has raised 80 per cent of its planned €20 billion borrowings this year.

Interest payments on the Government’s debt would peak at 20.1 per cent in 2014, said Mr Corrigan.

The spread, or difference between Irish and German borrowing costs, was disappointingly high, he said, but lower in absolute terms than in February 2009.

The premium investors demand to hold 10-year Irish bonds over benchmark German debt, dropped by 1 basis point (0.01 percentage point) to 293 basis points.

Mr Corrigan said that he would like to have €5 billion in debt maturing in 2011 funded this year.

He would not rule out the issuing of a large Government bond before the year end by way of a syndicated deal sold through banks rather than through the NTMA’s regular monthly auctions.

Mr Corrigan said he expected there to be good demand among debt investors in bonds worth between €1 billion and €1.5 billion the NTMA is selling next Tuesday in its regular monthly auction.

The NTMA’s salaries bill totalled €20.1 million for 2009, up from €19.9 million the year before.