Debt as a proportion of Irish GDP will continue to fall even if the Government runs a budget deficit this year, according to the National Treasury Management Agency (NTMA).
The State's national debt fell by €2.3 billion last year, bringing it to €35.9 billion by the end of 2006, and the debt/GDP ratio dropped to 24.9 per cent, one of the lowest levels in the EU.
Chief executive Dr Michael Somers predicted that this may fall to 23 per cent by the end of this year. Even if there is a small budget deficit this year, economic growth will be sufficient to make up for this, he said.
"The fact that debt is so low means that we're in a much better position to face into any choppy waters ahead compared to other countries," he added. "We seem to be the envy of a lot of countries around Europe." The State is now in the "extraordinary favourable situation" of being able to cover both current and capital expenditure out of current revenues, he observed.
However, tax revenues are likely to fall this year due to the softening of the housing market, and so a small budget deficit was anticipated.
The country's national debt is "well under control", but Dr Somers pointed out that private sector credit was now particularly high.
At the launch of the agency's 2006 annual report yesterday, he also said that the National Pensions Reserve Fund (NPRF) had grown by over 6.5 per cent so far this year, and now stands at €21 billion. The annual report showed that the NPRF (which is managed by the NTMA) delivered a return of 12.4 per cent last year, and has produced an annualised return of 6.5 per cent since the fund's inception in April 2001.
A small proportion of the fund's assets are invested in private equity, an industry which is currently facing intense scrutiny in Britain, with lack of transparency being one of the main criticisms.
Despite the current controversy, the NPRF has not been deterred from investing in this asset class.
"We feel we have adequate representation on advisory boards," NPRF chairman Paul Carty said. Dr Somers added that some of these investments have yielded "enormous" rates of return in the past.
