The chief executive of the National Treasury Management Agency (NTMA) will tell TDs that Ireland must prepare for the next "economic shock" as the country's economy bounces back from the pandemic.
Conor O'Kelly will use an appearance at the Dáil's Public Accounts Committee (PAC) to outline how "Ireland's position couldn't be more different" to the situation after the last financial crisis.
He will hail the increase in tax receipts and disposable income that have occurred despite the Covid-19 emergency but will also add a note of caution.
Mr O’Kelly is expected to say: “The question we ask ourselves in the NTMA is not whether Ireland will be hit by another economic shock but rather what sort of shape will we be in when it happens.
“When the crisis hit, we had fiscal room when we needed it most and, in the years ahead we need to create that room again.”
Mr O'Kelly will also offer the PAC an update on the work of the State Claims Agency (SCA) and its management of more than 12,000 active claims against State bodies with an estimated outstanding liability of more than €4 billion.
The NTMA is the agency that borrows on behalf of the State and manages the national debt.
Mr O’Kelly is set to tell TDs that it has raised €35.75 billion for the State since the start of the pandemic at an average interest rate of 0.16 per cent through the issuing of bonds.
The PAC will be told that despite increased borrowing by the State Ireland’s interest bill is continuing to fall and it is expected to be €3.5 billion this year, down from €7.5 billion five years ago.
Mr O’Kelly’s opening statement does say that “with a higher stock of debt we will have some refinancing risk in the future” but adds that a NTMA strategy “of locking in these low rates for longer means any refinancing risk is still quite a few years away.”
He will point to the strength of Ireland’s fiscal position – with Budget surpluses for two years prior to the pandemic – as one of the key reasons Ireland was “able to respond so quickly and forcefully to the economic challenges presented by the pandemic”.
Creditworthiness
Mr O’Kelly will say that real GNI, instead of falling by 18 per cent – as happened in the last economic crisis – is set return to 2019 levels later this year.
He says tax revenue – which fell by 22 per cent in the previous crisis – is “12 per cent above 2019 levels already.”
And disposable income – instead of falling by 5 per cent in the previous crisis – “rose by over 5 per cent in 2020 despite the pandemic.”
He will tell TDs that “Ireland’s creditworthiness and reputation with rating agencies and investors is strong.”
On the SCA – which falls under the NTMA’s remit – the committee will be told that it resolved more than 3,200 claims against the State in 2020 despite the impact of Covid restrictions on activity in the courts.
His statement says the SCA pursues mediation as an alternative to the formal courts process and 53 per cent of cases resolved in 2020 were resolved without court proceedings being served.
Mr O'Kelly will outline the SCA's pandemic related work including updating the National Incident Management System to specifically capture Covid-19 related incidents and advising the Department of Health on the provision of State indemnities to the manufacturers of seven Covid-19 vaccines.
