Minister for Finance Paschal Donohoe has committed to putting €3 billion into the State's so-called rainy day fund by 2021, but said the aspiration was to get the fund up to €8 billion over the medium term.
A Department of Finance spokesman later confirmed that the €8 billion figure was "the broad target for potential size of the fund" on completion.
He also admitted the target was likely to require a bigger annual contribution than the €500 million currently envisaged if it was to be achieved over the medium term, and that would be a matter for future administrations.
Announcing the Government’s decision to approve the drafting of a rainy day fund Bill, Mr Donohoe said the fund, first mooted in 2016, was an important element of the Government’s strategy “to strengthen public finances and improve the Irish economy’s resilience to external shocks”.
He said his intention was to transfer an initial tranche of €1.5 billion from the State's sovereign wealth fund, the Ireland Strategic Investment Fund (ISIF), and add €500 million a year for the next three years. This will see the fund reach €3 billion by the end of 2021.
Mr Donohoe will set aside the first €500 million as part of the 2019 budget, which will be announced in October.
“The medium-term plan is that we would get this fund up to approximately €8 billion,” he told Newstalk radio.
Many other needs
“We have many other needs that we have to meet each year but given how low the deficit is at the moment and given where our tax revenues are, I think it is appropriate to create an additional fund and an insurance policy for the kind of thing that we are not able to plan for at the moment,” he said.
In a separate briefing, Department of Finance officials attempted to clear up confusion over the amount of money the Government was likely have for additional spending and tax cuts in the budget.
They said the precise fiscal parameters for Budget 2019 would be set out by the Minister in his summer economic statement in June.
However, based on last year’s projections, there was an indicative fiscal space of €3.2 billion for 2019 with €1.4 billion already taken up by previously entered into spending commitments.
When the €500 million earmarked for the rainy day fund is removed, this would leave between €800 million and €1.3 billion, they indicated, with the larger figure requiring a greater budget deficit than is currently envisaged.
