More than £2.7 billion (€3.4 billion) was wiped off Ireland's national debt this year and the State now has the second lowest debt in Europe relative to its gross domestic product. The debt/GDP ratio fell from 50 per cent in 1999 to 39 per cent in 2000 and only Luxembourg has a lower debt/GDP level among the 15 EU member-states.
National Treasury Management Agency chief executive Dr Michael Somers said the 8.6 per cent fall in national debt to £28.7 billion was by far the biggest ever annual reduction and reflected mainly the forecast £2.6 billion Exchequer budget surplus this year.
And the outlook over the next three years is for further dramatic reductions in Ireland's level of debt, with the NTMA forecasting a debt/GDP ratio of 33 per cent at the end of 2001, 28 per cent by end-2002 and 24 per cent by end-2003. NTMA director Mr Paul O'Sullivan said that based on current budget projection, about one-third of the remaining national debt will be cleared over the next five years.
From a situation 10 years ago when Ireland's debt was 163 per cent of the EU average, the State now has a debt/GDP ratio 62 per cent of the EU average. Interest payments on the debt fell by 12 per cent on the 1999 figure and debt service costs came in £213 million below the NTMA's budget
The NTMA will shortly take over the management of the National Pensions Reserve Fund, whose aim is to cushion the Exchequer against rising future pension costs as a result of the projected ageing of the population. Just over £5 billion - mainly the proceeds of the Eircom flotation - is currently available for investment, while the fund will also receive an annual allocation of 1 per cent of Gross National Product or about £700 million.
Dr Somers said that he expects the seven commissioners who will control and manage the fund to be appointed in the new year and that he, as NTMA chief executive, will be one of the commissioners.
The first job will be to decide asset allocation of the fund between equities, bonds, property and cash. The expectation, however, is that the fund will be substantially invested in a diversified portfolio of international equities.
Once asset allocation has been decided, then it is likely that the fund will be divided and parcelled out to external fund managers, Dr Somers. He added that legal opinion is that the management of the various parts of the fund will have to be advertised in the European Journal, meaning that domestic fund managers will be competing with their international competitors for part of the fund management.
Meanwhile, figures from the Central Bank show that mortgage lending by Irish banks and building societies remains at a high level. Lending rose by €593 million or 2.1 per cent in November, bringing the annual growth rate to 21.2 per cent compared to 18.3 per cent in the previous month.
