THE NATIONAL Treasury Management Agency (NTMA) will not need to raise as much money this year as it did in 2009, as Ireland’s budget deficit shrinks and fewer bonds mature, it said yesterday.
The NTMA plans to raise up to €20 billion through the bond markets in 2010, compared to the €35.4 billion it raised in long-term funding in 2009. This money was used to fund the exchequer deficit of €24.6 billion and to refinance a maturing €5 billion bond.
This leaves a “carryover” of more than €5 billion available, which is to finance the deficit in 2010.
The NTMA’s borrowing plans for the year are also lower than last year because of a smaller projected exchequer deficit of €18.7 billion and because the value of maturing bonds that need to be refinanced is lower, at €1.2 billion.
In 2009, the State paid €3.2 billion in interest on the national debt, which stood at €75.2 billion at the end of the year. These debt servicing costs were €686 million below budget, partly due to lower interest rates over the latter part of the year.
NTMA chief executive John Corrigan said the “war chest” of cash reserves built up by the NTMA during 2008 had enabled it to time its entry into debt markets carefully in 2009 and take advantage of “more positive” investor sentiment towards Ireland in the end stages of the year.
Mr Corrigan said the NTMA’s cash balances – built up to cope with more uncertain economic times – will eventually be reduced.
Some 95 per cent of the national debt now carries fixed rates of interest, protecting the exchequer against the effects of rising interest rates, he added.
Meanwhile, the premium, or spread, that Ireland pays on its debt compared to the benchmark German rate narrowed over the course of 2009, ending the year at 1.45 percentage points compared to nearly 3 percentage points in March – the month in which international confidence in the Irish economy was at its weakest.
“We would be hopeful that provided there are no accidents, we would have a lower spread over the course of 2010,” Mr Corrigan said. However, the spreads, which are outside the NTMA’s direct control, were unlikely to return to the 0.5 or 0.6 percentage point spreads seen during the height of Ireland’s economic euphoria, he added.
The agency manages the National Pensions Reserve Fund (NPRF) on behalf of the State, acts as an agent for the Minister for Finance in relation to the State’s preference share investments in the banks, and is also charged with ensuring that the National Asset Management Agency (Nama) becomes fully operational.
The average discount on the €80 billion in loans to be transferred to Nama may vary among the financial institutions participating in the State’s “bad bank” scheme, according to Nama chief executive Brendan McDonagh.
Although the Nama transfer process, which in effect forces the banks to acknowledge the full extent of their exposure to “toxic” loans, was a “difficult” experience for the lenders, his agency was receiving full co-operation from them, Mr McDonagh said.
