asked the Minister for Finance the extra cost to the Exchequer in 1983 of (a) capital and (b) interest repayments of total Exchequer foreign borrowings arising from the Government's decision in March 1983 to devalue our currency within the EMS.
Ceisteanna — Questions Oral Answers - Foreign Borrowing.
9.
The re-alignment of the exchange rates of the EMS currencies agreed last March had the effect of increasing the Irish pound value of capital repayments on Exchequer foreign debt by about £12 million in 1983 and, as I said in my statement to the Dáil on 22 March, the effect on interest payments on foreign debt in 1983 is approximately £17 million.
There are two points I wish to raise with the Minister. First, how can he square what he has said with a statement he made a month ago pointing out that the interest payments arising from devaluation would be higher than anticipated? Secondly, how does he square his statement with what was said by the Minister of State, Deputy Collins, in London where he indicated that this year our total external debt will amount to almost $8 billion, or approximately IR£6.9 billion? On that basis looking at the adjustments on the exchange rate, the actual rise in our external debt over the year would be about £1.5 billion. How does the Minister reconcile the figure of £17 million with the statement, assuming that what the Minister of State said in London is true?
The Deputy should refer more closely to what I said. In March I said the effect of the realignment on interest payments on foreign debt would be approximately £17 million and that continues to be the situation. The Irish pound value of capital repayments on Exchequer foreign debt will increase by about £12 million this year as a result of the realignment. There is no difficulty whatever in squaring those figures.
What about the statement of the Minister of State, Deputy Collins, in London not long ago on behalf of the Government? He indicated that our total external debt this year would be $8 billion? Arising from the adjustments in the exchange rates this year, this would suggest that the increase in our external debt would be of the order of £1.5 billion. I am asking the Minister to square that figure with what he has said.
The Deputy is arguing from the particular information I have given him about the change in the Irish pound value of capital repayments and the effect on interest repayments to the total of our foreign borrowing. What we are talking about here is only one component of the total of our foreign borrowing programme during 1983. There is no reason why there should be any particular convergence or divergence between the trends of the two amounts. The subject matter of this question is one of many components of our total foreign borrowing this year.
Is the Minister referring to borrowings we have taken out in 1983 and the adjustment on such borrowings? Is that what the Minister is referring to in the £17 million? I am talking about our total borrowing.
No, the change in interest payments and the change in the value of capital repayments arising from the re-alignment in 1983——
I am talking about our total borrowing.
If the Deputy would stop interrupting me he might hear what I am saying. The change arises in respect of amounts of loans taken out before the date of the realignment. There is no effect on loans taken out after that because obviously they were taken out at the interest rates and exchange rates that applied post-alignment.
We are now getting into semantics.
I am giving the Deputy the facts.
Is the Minister dismissing from the calculation the cost of the borrowings post-devaluation? Is he implying that we should not take into account the extra capital repayments and the extra interest that will arise simply because it was after a very bad devaluation decision by the Government? If the Minister wishes to engage in such semantics he is entitled to do so but he is not recognising the very damaging impact of that decision on our budget deficit.
I am afraid there is nothing I can do to help the Deputy if he believes that a precise answer to a precise question is semantics because he does not happen to like the answer. He asked what would be the extra cost to the Exchequer in 1983 of capital repayments and interest payments of total Exchequer foreign borrowings arising from the decision in March 1983 to devalue our currency within the EMS. If I am being semantic I might quibble with the specific terms of that question. I have given the Deputy the answer on what difference that action made to the amount of capital repayments and interest payments we have had to make during 1983.
It is not quite clear from the manner in which the Minister has approached this question that he is excluding from the cost of interest and capital repayments any borrowings this year since the devaluation. If he thinks that is not an extra cost to the Exchequer and that it will not strain the budget deficit, with which he is understandably concerned ——
The Deputy has spoken twice of what he considers to have been a bad devaluation decision. I will not be drawn on that because it is an old song the Deputy has been singing.
And will sing again.
He will sing it again in spite of what we have seen over the years in terms of our very substantial performance in the growth of industrial exports, not a little of which must be attributed to the realignment, as anyone in the business of exporting will tell the Deputy if he cares to ask them with an open mind. The realignment does not incur cost of debt contracted since 21 March. That debt is paid for at whatever market rates of interest are, at whatever the exchange rates are. If we were to follow the Deputy's view we would have to go back over all our existing foreign debt and track back through all the changes in exchange rates since a given debt was incurred, to find out what now is the effect. We would have to go back to unspecified dates and we could debate the matter for days, arguing about which point was the starting point in order to begin to calculate the effects on all borrowing. Frankly, I do not think it would be worth while.
Is the Minister telling us that calculating such things are so tedious and so time-consuming that they are not worth while undertaking? Surely they are worth while in view of the cost to the Exchequer? He spoke of the beneficial impact of that decision and of its assistance to our exports. Does the Minister recall that in the House he indicated that the prospective inflation rate for 1983 as a whole should be no higher following the re-alignment than appeared likely at the beginning of the year? Will he not acknowledge that the Central Bank in their latest report clearly indicate, as we said then, that this will have a very significant effect on inflation? Does the Minister not agree, accordingly, that it has been damaging from the inflation viewpoint and that the export boost he has spoken about is unfortunately limited to technology industries that were established under Fianna Fáil Government and not to native industries?
I am not objecting to the kind of calculations implicit in the Deputy's question because they are long or tedious: I am simply saying that they are downright irrelevant. As far as the second part of his question is concerned in relation to the rate of inflation, I said in March, and I have no reason to change my view, that the effect of the re-alignment of itself would not add anything to the prospective rate of inflation over the year. Broadly speaking, it represents a balancing of the carry over effects of our relatively high value currency before the re-alignment against the effects of a rather low value currency since the re-alignment and the working out of these two effects in the time lag that applies. I have no reason to change my view on that point.
Would the Minister agree with the report of the Central Bank?
It is rather interesting to hear the Deputy trying to dismiss the very substantial growth in our industrial exports this year in the way he did. If the Deputy would read not only the Central Bank Report but the latest ERSI Report and all the other information available about our industrial exports he would note that not only are we making substantial progress in regard to export volume but that the recovery of the growth in the level of exports would appear to be expanding outside the confined range of new technology industries.
The authority for the effects of this on indigenous industries is not mine but that of the Confederation of Irish Industry with whom we on this side had discussions recently — I presume the Minister had as well. I would rely on their view as being representative. Is the Minister dismissing their view? They have said they are of the opinion that it is the technological industries established in the manner I have said which are the main element in the export growth rather than native Irish industries who, because of our non-competitive rate of inflation, are not even reaching the markets these days?
The Deputy and I could debate this all afternoon.
Would you find a more convenient place to do it?
I had a meeting with a group from the CII, during the course of which the group spokesman confirmed their agreement with the view that the export volume increase is now widening past the rather restricted group of the newer industries, where that growth started.
There must have been a dramatic change in the last few days.
Can the Minister confirm whether the Government are considering a further devaluation of the púnt?
If the Deputy had spoken to Deputy O'Kennedy in front of him he would have the wit not to put a question like that. It is absolute nonsense.
10.
asked the Minister for Finance the total cost to the Exchequer, or companies concerned, of capital and interest repayments of foreign borrowing by semi-State companies arising from the Government's decision in March 1983 to devalue our currency within the EMS.
It has not been possible in the time available to assemble the information requested by the Deputy. If the Deputy will repeat his question in two weeks I hope to be in a position to supply the information.
I would gladly accept the invitation. When I get the answer I hope it will be comprehensive.
Again the Deputy is making a speech.
The Deputy may hope as he wants. I may be unfair by giving the reply in the form of a table.
All this is very unfair for Deputies waiting on the sidelines.