The value of National Pensions Reserve Fund fell by 3.8 per cent or €300 million in the second quarter of the year, but it is still up 1.3 per cent since the start of the year.
The fund - set up to meet future pension costs - increased to €16.6 billion in March, but a sharp correction in equity market reduced its value to €16.3 billion by end June.
"The fund's strong performance in 2005 was driven by buoyant global equity markets, however, it is unrealistic to expect financial markets to continue to deliver these types of returns as evidenced by the pullback during the second quarter," NPRF chairman Paul Carty said yesterday at the launch of the National Treasury Management Agency's (NTMA) Annual Report for 2005.
The national debt stood at €38.2 billion at the end of last year, according to the NTMA.
As a percentage of Gross Domestic Product - the value of economy's output - the national debt fell from 29.4 per cent at the start of the year to 27.6 per cent at year's end. When the value of the NPRF is taken into account Ireland's net debt was just 17.9 per cent of GDP, the report states.
The cost of servicing the debt was €1,865 million per annum, €257 million below expectations.
"We really have no bad news to give you," NTMA chief executive Michael Somers said yesterday. However, he expressed concern that public sector debt had been replaced by higher levels of debt in the private sector. "We now have a situation where the private sector is heavily in debt. The state's debt is very manageable," he said.
Welcoming the report's publication, Finance Minister Brian Cowen said the nation's finances were in a strong position. When asked if the Government would consider additional State borrowing in the future to fund growing infrastructure needs, Mr Cowen hinted that that the Government might be open to increasing the pace of capital investment under the next National Development Plan, due between 2007 and 2013.
"We need to invest in infrastructure and that involves an accelerated capital programme. We need to do that so we don't constrain the productive capacity of the economy," Mr Cowen said.
The Government now expects to achieve a budgetary surplus of 0.7 per cent of Gross Domestic Product (GDP) compared to an expected budget time deficit of 0.6 per cent.
