NTMA boss says markets will support borrowing €4bn a year for housing

Conor O’Kelly ‘reasonably sanguine’ about State’s ability to borrow

NTMA chief executive Conor O’Kelly: ‘I think that it is okay to borrow those kinds of sums annually for housing.’ Photograph:  Alan Betson

NTMA chief executive Conor O’Kelly: ‘I think that it is okay to borrow those kinds of sums annually for housing.’ Photograph: Alan Betson


Borrowing €4 billion a year to fund the Government’s new Housing For All strategy will be supported by international funding markets, the National Treasury Management Agency (NTMA) chief executive Conor O’Kelly said on Thursday.

This comes even as Government’s already high debt burden has increased sharply as a result of Covid-19.

Appearing before the Oireachtas Public Accounts Committee, Mr O’Kelly said he would be “reasonably sanguine” about the State’s ability to continue to borrow for capital investment and infrastructure even as the Government seeks to eliminate borrowing for current spending by 2023.

While Mr O’Kelly said that borrowing €4 billion is “a very large number” for the State, he added: “I think that it is okay to borrow those kinds of sums annually for housing.”

The Government pledged early last month to provide €4 billion of State funding for social and affordable housing as part of a plan to deliver 33,000 homes a year in the Republic. The total cost of delivering that number of houses and apartments would come to about €11 billion per annum, Mr O’Kelly noted.

While the Central Bank estimated this week that the Government’s expected €237.8 billion year-end debt figure will equate to 54.5 per cent of gross domestic product (GDP), it will stand at 106.6 per cent of the underlying domestic economy.

The debt level has increased as the NTMA raised €35.8 billion in the international bond markets since the onset of the Covid-19 pandemic in early 2020 to fund government supports for households, businesses and the health system. The bonds were sold at an average interest rate of 0.16 per cent, helped by European Central Bank (ECB) efforts to keep euro zone borrowing costs down.

Another economic shock

“The question we ask ourselves in the NTMA is not whether Ireland will be hit by another economic shock but rather what sort of shape will we be in when it happens,” Mr O’Kelly said. “When the crisis hit we had fiscal room when we needed it most and, in the years ahead we need to create that room again.”

Separately, Mr O’Kelly confirmed that Aer Lingus was in talks with the Ireland Strategic Investment Fund (ISIF) to secure additional funding from its €2 billion pandemic recovery fund set up last year to support medium-to -large-sized companies through the Covid-19 crisis.

The NTMA is responsible for the ISIF. The fund has so far committed about €800 million to companies, half of which has been allocated so far in 2021. The fund agreed last year to provide a €150 million loan to Aer Lingus in two tranches, with the second drawn down in March.

Aer Lingus chief executive Lynne Embleton said in July that the airline, which is part of International Airlines Group (IAG), could seek a second loan from the ISIF fund as it emerges from tough Government Covid-19 curbs. She made the comments as the airline reported that its operations lost €192 million for the first six months of this year, a similar loss to the €189 million incurred during the same period in 2020.

She noted at the time that Aer Lingus had been the hardest hit of IAG carriers, largely due to Irish Government travel restrictions during the reporting period, which were among Europe’s toughest.

The Irish airline is currently seeking to push through a round of cost-cutting.