Government debt is now only 63 per cent of the European average, according to the National Treasury Management Agency (NTMA).

Launching its annual report yesterday its chief executive Dr Michael Somers said the agency had made overall savings to the Government of #271 million in 2000 as the debt, and hence interest payments, fell by some #3.3 billion.

Declining debt also means a far smaller proportion of taxpayers' money goes to paying off the debt than in past years. According to Dr Somers, in 1990 28 per cent of all taxes went to pay off the debt, whereas last year it was 7.6 per cent.

The debt now stands at #36.5 billion, or on the EU General Government deficit basis at #40 billion, having fallen by 3.9 billion. The EU definition is wider and takes no account of current balances.

If money had not been invested in the pension fund the debt would amount to #34 billion on a national basis, or #33 billion on the EU measure.

The NTMA will not be issuing any debt this year but will next year as some debt matures and has to be re-financed. Dr Somers said he could not indicate how much borrowing the Government would do as he has no idea yet of the likely size of the Government surplus.

He added that the primary dealers have been lobbying for a bond exchange programme and this was a possibility. "We need to see what it needs to keep the market going, we are keen to have a liquid market and keep margins down."

Non-residents now hold 50 per cent of all Irish bonds as the NTMA's marketing campaign has succeeded.

It is still working on the coveted AAA rating from Standard & Poor's and Dr Somers said he was hopeful that the agency could be persuaded to give the upgrade this year. "I've told them if they do not get a move on there will not be any debt to rate," he said.

Indeed on current projections the debt could be paid off by around 2010 if money was not going towards the National Pension Reserve Fund.

The NTMA has also received over 150 expressions of interest in managing part of the National Pension Reserve Fund.

The agency has asked the managers to express an interest in managing the #8-billion fund, which will be in 14 different tranches of money.

But Ms Deborah Reidy, who is overseeing the process, said many mangers are registering for more than one tranche, and even several of their funds for the one tranche.

The fund, which is likely to be worth #8 billion at the end of the year, is being invested 40 per cent in euro-zone funds, 40 per cent in the rest of the world and 20 per cent in bonds.