NTMA portfolios top €50 billion

The portfolios managed by the agency responsible for the national debt and the State pension fund topped €50 billion for the first time in 2004, according to its results for the year.

The National Treasury Management Agency (NTMA), which manages the State's debt and pension fund reserve, said at the weekend that its total asset and liability portfolios exceeded €50 billion for the first time in 2004.

At the same time, NTMA chief executive, Dr Michael Somers, said that the agency handled cashflows of €532 billion during the year.

On New Year's Eve, the agency said that, based on Department of Finance estimates, the national debt had increased by €473 million to €38.1 billion.

However, the Republic's actual debt burden is continuing to fall. "If you look at the national debt and deduct the various cash balances that the State has, like the National Pension Reserve Fund (NPRF), then you could pay it off with just eight months' tax revenue," Dr Somers said.

He pointed out that when the NTMA was established in 1990, it would have taken three months' tax revenue just to pay off the interest.

Excluding the NPRF, which is worth €11.7 billion, the Republic's debt-to-GDP (gross domestic product) ratio is 30.5 per cent, one of the lowest in the EU. Including the fund, the ratio is closer to 22 per cent.

The results show that interest payments cost the Exchequer €1.44 billion in 2004, which was €348 million below the budget target.

This came to 4 per cent of tax revenues, compared to a decade earlier, when interest repayments swallowed 20 per cent of tax revenues. "This reduction in the interest burden has freed up substantial resources for other purposes," the NTMA said.

The agency raised €3.4 billion by auctioning a series of bonds, with an average interest repayment of 4.67 per cent, during the year. "But the budgetary position was so good by the middle of the year that we had to stop the auctions because we had enough cash," Dr Somers said.

The agency also issued a new benchmark 4.5 per cent bond in January to take advantage of low long-term interest rates. It will mature in 2020 and investors in 5 per cent paper, due to mature in 2013, took advantage of an offer to switch to the new issue.

Over 81 per cent of Irish Government bonds are now held by non-residents. The agency said that turnover of the instruments on the Irish Stock Exchange during the year was €71.3 billion, which was in line with the average since 2001.

At the end of 2004, 86 per cent of the national debt carried a fixed rate of interest, compared with 76 per cent a year earlier. Dr Somers said that the NTMA was in talks with various international banks in an effort to cut rates by a further 0.1 to 0.12 per cent.

During the year, the agency also resolved difficulties for prize bond sales. An EU directive required purchasers to provide their tax numbers when buying the bonds. However, holders will only be required to produce this information if their bond wins a prize.