The Government should consider restoring the old National Pension Reserve Fund (NPRF) to help meet the cost of the Republic’s ageing population, according to the National Economic and Social Council (NESC).
In a new report, the think tank calls on the Government to consider restoring the NPRF, most of which was used to help bail out the Republic’s insolvent banks in 2010 under a bailout deal with the European Union and the International Monetary Fund (IMF).
The council says there is a “value in establishing a fund to make a contribution towards future costs”.
Otherwise, the council warned that without reforms, the State would end up facing a considerable shortfall in its finances.
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Its latest report, Understanding the Irish Economy in a Time of Turbulence, said the new fund could be designed and ring-fenced to meet the needs of an ageing population.
Then minister for finance Charlie McCreevy established the original NPRF in 2001 to help meet the likely rising cost of State pensions as the Republic’s population aged over future decades.
However, the Government exchanged €17.5 billion from the fund for shares in Irish banks, as part of the EU-IMF €85 billion bailout agreed upon in 2010, after the lenders’ exposure to property speculation collapsed the financial system.
The remaining €7 billion went into the Irish Strategic Investment Fund (Isif), originally used to fund job-creating businesses to aid the Republic through the recession caused by the banks’ implosion.
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Isif’s assets are worth more than €9 billion now, while the State has €6 billion allocated to a new reserve fund.
The NESC report also argued for targeted investment in housing to tackle the ongoing crisis and noted that the Government spent €153 million less than the amount for which it had budgeted last year.
Inflation in building materials, fuel and energy delayed State-funded construction projects in 2022, the report acknowledged.
NESC director Larry O’Connell claimed that the report set out how “steps can be taken to improve the resilience of Ireland’s economy for the welfare and benefit of all those living in the State”.
Separately, the IMF’s managing director has warned that the global economy is facing years of slow growth, with medium-term prospects their weakest in more than 30 years.
Speaking in Washington in advance ahead of the World Bank and IMF spring meetings next week, Kristalina Georgieva said the world economy would expand at an average annual rate of about 3 per cent over the next five years.
The figure is well below the average 3.8 per cent forecast of the past two decades and marks the weakest projection for medium-term growth since 1990.
