Ireland's national debt as a proportion of gross domestic product is now the third lowest in the European Union at 47 per cent of GDP, according to end-of-year figures from the National Treasury Management Agency. And debt/GDP is expected to fall by a further six percentage points to 41 per cent in the coming year based on the latest budgetary forecasts, according to the agency.
The debt/GDP ratio would have fallen to 43 per cent - the second lowest in the EU after Luxembourg - but for a major restructuring of the Exchequer's portfolio of domestic bonds, which increased the level of debt while significantly reducing the cost of servicing that debt.
The only blemish on an otherwise excellent year for the Exchequer balance sheet was the continuing refusal of one of the main ratings agency, Standard & Poors, to upgrade Ireland to AAA status. The agency's chief executive, Dr Michael Somers, said that S&P, which alone among major ratings agencies does not give Ireland a prime rating, said S&P's main concern was the growth of consumer credit in Ireland.
The 43 per cent debt/GDP ratio at the end of the year means that the State's ratio is now just 71 per cent of the EU average compared to 159 per cent in 1991. And the interest bill on the national debt as a percentage of tax revenues has fallen to 10 per cent, compared to 14 per cent in 1998 and 28 per cent in 1990.
Interest payments on the national debt fell last year by £244 million (€310 million) to £1.85 billion, £348 million below the target set in the December 1998 budget. And while the total debt, in nominal terms fell by £1.3 billion, exceptional items in the form of FEOGA debt transferred to the agency and £2.7 billion from the restructuring of the domestic debt portfolio, meant the level of debt in the national balance sheet increased to £31.4 billion, up by £1.9 billion.
Dr Somers said this "securities exchange programme", aimed at maintaining the competitiveness of Irish Government bonds in the post-euro environment, had been a huge success with a 91 per cent take-up from investors.
Dr Somers said legislation was expected by next Easter on the establishment of reserve funds to meet the Exchequer's growing future pensions liability. The NTMA has been given responsibility for the interim management of this fund - which has been initiated by the proceeds of the Eircom flotation.
He added that if the NTMA were to be selected as the overall manager of the fund - likely to total £5 billion by the end of next year - the actively managed portion of the largely equities funds would be allocated to outside fund managers, with the agency probably retaining responsibility for the passively-managed index-based component of the fund.
"It's still a matter for legislation," Dr Somers emphasised, although he added that the NTMA had already had preliminary contacts with fund managers and actuaries. "They're all anxious for this business," he said.
