asked the Minister for Finance the estimated cost to the Exchequer of a 1 per cent rise in interest rate payable in newly issued Government securities; whether he has made any contingency arrangements for such a rise this year; and if he will make a statement of his Department's policy and assessment in relation to interest rates.
Written Answers. - Government Securities.
51.
An amount of £2,048,289,000 is provided under Central Fund Services in this year's budget to cover interest payments on the service of public debt. However, for market-related reasons it is not the practice to provide forecasts of the impact of changes in interest rates on debt service costs. In general, the impact of such changes would depend on their timing and duration and also on the timing and composition of borrowing.
The level of interest rates is a matter primarily for the Central Bank. However, as set out in the Programme for National Recovery, monetary policy is determined by the need to bring about the lowest possible interest rates consistent with international developments and exchange rate policy. During the past two years Government policy has facilitated a dramatic fall in domestic interest rates and the prime overdraft rate of the Associated Banks has fallen by 6 percentage points, from 14 per cent to 8 per cent. However, domestic interest rates continue to be influenced by international developments as well as by the continuing improvement in domestic economic fundamentals.