THE Irish national debt has fallen for the first time in 39 years and the debt to GDP ratio has tumbled more than 8 per cent, propelling the Republic towards qualification for European Economic and Monetary Union, the National Treasury Management Agency (NTMA) has said.
The latest figures, published only after the foreign exchange markets had closed on New Year's Eve, showed that the interest payments on the debt last year were £2.26 billion, £167 million less than the 1996 pre Budget estimate.
As a proportion of tax revenue, the NTMA said that, in 1996, 16.3 pence in each tax pound went on interest payments, compared with 17.3 pence last year. In 1990, the agency pointed out, almost 27p in every tax pound went to service the debt.
For the first time in 39 years, the total debt amount fell last year, dropping to £29.9 billion from £30.2 billion at the end of 1995. Using the General Government Debt method of calculating the amount which is favoured by most European countries and by the EU - the Irish national debt is estimated to be £32.3 billion, against £32.7 billion at the end of 1995.
"The main reasons for the fall in the debt is that the Irish pound has gone up in value, and that the Exchequer Borrowing Requirement is quite low," said Dr Michael Somers, the NTMA's chief executive.
"As a result of converting our foreign currency debt into Irish pounds there's been a substantial gain this year compared to last year.
Dr Somers said that the Government had predicted that the NTMA would exceed its pre budget target for managing the debt: "In the Budget, the Minister for Finance pencilled us in to save £100 million, the figure in fact came out at £167 million."
But the Government will be most pleased with the debt to GDP ratio, which is used as a key criterion for participation in the EU single currency.
As a proportion of GDP, the debt now stands at 73.3 per cent. This time last year, the figure stood at 81.6 per cent of GDP.
Under the Maastricht rules, countries should have a debt to GDP ratio of not more than 60 per cent, or should be making clear progress towards that percentage, by the end of 1997.
"This brings us very close to the European average at this, stage ... and while we've been coming down, a lot of other countries have been going up," Dr Somers said.
The NTMA said that £21.2 billion of the debt was in Irish pounds, with the remaining £8.7 billion in foreign currency. The agency said it had made a priority of reducing the foreign currency debt, and pointed out that it had cut close to £2 billion off the total since the end of 1995.
The agency made gross foreign currency repayments of £1.35 billion, with the rest of the reduction due to the increase in value of the Irish pound.
"Over the last few years we've been trying to repay this debt where possible, because it removes the exchange rate risk on a substantial part of our liabilities" Dr Somers said.
By way of illustration, he said that all of the NTMA's executives had computer programmes which calculated the Republic's foreign currency debt, changing instantly with each fluctuation in the markets: "You can see it swing by 40 or 50 million in the space of a few minutes, literally."
Of the current foreign currency debt of £8.7 billion, some 26 per cent is held in sterling, 21 per cent in US dollars, 15 per cent in deutschmarks, 14 per cent in French francs and 11 per cent in Swiss francs, the NTMA said.
Since the NTMA was established in 1990, there has been a considerable reduction in the cost of servicing the debt as a proportion of GDP, Dr Somers said.
In 1990, the interest cost was 7.7 per cent of GDP, by 1993 the figure had been cut to 6.4 per cent, and in 1995 it stood at 5.1 per cent. In 1996, the interest on the debt ran at 4.9 per cent of GDP.
Last year, the agency raised some £479 million in 1996 through the Small Savings Schemes operated by An Post. This compared with £440 million in 1995.
Gross sales of Government bonds amounted to £2.68 and turnover at the NTMA's primary trading desk came to £14.48 billion, with bond switching accounting for £8.03 billion of this total, the agency said.
"We have a secondary dealer as well, and he had a turnover of just under £4 billion. The market during the year was quite volatile," Dr Somers said.
"The overall return on the Irish bond market was roughly the same as the average for the European markets. In other words if somebody bought a bond at the beginning of the year, took the dividends and sold it at the end of the year, they would have got are turn of just over 11 per cent."
