The Irish Times view on the national debt: Bracing for the bad times

The statement yesterday by Conor O'Kelly, the chief executive of the National Treasury Management Agency, that he is 100 per cent sure there will be another Irish recession is a bit like saying we will – some day – get another summer like the one of 2018.

It will surely happen – we just don’t know when. Nonetheless the underlying point should not be ignored. We are comfortably managing our national debt now because there is an unusual combination of strong growth and rock-bottom interest rates. It would be stupid to rely on both factors continuing indefinitely, because we know they won’t.

The NTMA’s main task is managing Ireland’s national debt of over €200 billion. The debt burden in relation to Ireland’s national income has been falling in recent years, but the actual cash level of Ireland’s debt remains high. And O’Kelly is correct that our status as a small, open, indebted economy leaves us vulnerable to outside events such as Brexit, or trade wars.

A no-deal Brexit would push the exchequer finances back into the red and see us again add to our borrowing pile

We have improved our debt position in another way in recent years, with rock-bottom interest rates allowing about half of the part of our debt traded on the markets to be refinanced at a low cost. With 10-year Irish interest rates now barely trading at a positive interest rate and a negative rate prevailing on shorter-term debt, the exchequer will get another boost as more debt is refinanced in the months ahead.

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This is hugely advantageous. It is no surprise that O'Kelly welcomed the nomination of Christine Lagarde as the new president of the European Central Bank, as she is likely to continue the policy of low interest rates and monetary expansion.

The likelihood now is that the cost of funding new national debt will remain low for quite some time to come, in contrast to expectations at the start of the year that it would slowly start to edge higher. The NTMA chief executive is also correct that the high debt level is an important policy consideration and we must focus on reducing the burden further. Unfortunately, a no-deal Brexit would push the exchequer finances back into the red and see us again add to our borrowing pile.