When the National Treasury Management Agency (NTMA) was set up in 1990, few thought the State body would evolve so much over the next quarter century and play such a critical role in the Irish economy. The NTMA was established to handle national debt management, previously a function of a division within the Department of Finance.
The agency’s move outside the civil service was prompted by the need to attract and retain financial staff with the professional skills to manage the State’s borrowing needs. This change in status released the agency from the limitations of public service pay norms and allowed it to compete with the private sector for the necessary expertise.
The role of the NTMA has greatly expanded since then, and the agency has acquired a range of new responsibilities. These stretch from acting as the State Claims Agency, in handling legal claims against the State; to operating the National Asset Management Agency (NAMA) in 2009; and last year to managing the Strategic Investment Fund.
The NTMA was established just as Ireland was emerging slowly from an economic bust in the 1980s. Then, as now, the agency had to deal with high levels of sovereign debt; after the collapse of the Celtic Tiger, some €203 billion remains outstanding (up from €40 billion in 2007) – a debt to GDP ratio below 100 per cent.
But despite the heavy debt burden, Ireland has been re-rated by international investors, impressed by the rapid pace of economic recovery. As NTMA chief executive Conor O’Kelly pointed out last week – crediting Minister for Finance Michael Noonan – Ireland has been defined “more by how we got out of this crisis than by how we got into it”. Yet he remains cautious and rightly so.
Given the high level of sovereign and household debt, Ireland is in a vulnerable position. The Irish Fiscal Advisory Council has warned that another global recession or financial crisis could have “the potential to disrupt Ireland’s economic recovery, widen the deficit and see a return of the dangerous debt dynamics of the recent past”. We have been warned.