Vol. 434 No. 4
88 Mr. Yates asked the Minister for Finance if he has satisfied himself with the level and proportion of the national debt which is denominated in Sterling; and the steps, if any, he proposes to take in conjunction with the National Treasury Management Agency to increase the proportion of the debt in Sterling.
Under the National Treasury Mangement Agency Act, 1990, the borrowing and debt management functions of the Minister for Finance have been delegated to the National Treasury Management Agency subject to general directions and guidelines issued by the Minister for Finance. The guidelines given to the agency provide it with considerable flexibility concerning the choice of currencies.
I am advised by the agency that over the past decade, interest rates in Sterling have tended to be much higher than rates in most other major currencies. For instance, over the period 1987-91, short-term Sterling rates exceeded short-term Deutsche Mark rates by some 5 per cent. In addition, the Sterling exchange rate tended to fluctuate much more against the Irish pound than did the exchange rates of narrow-band ERM currencies. Accordingly, the agency did not consider it appropriate to concentrate borrowings in Sterling.
In the past year or so, Sterling interest rates have fallen significantly so that short-term rates are now below corresponding rates in Deutsche Marks. This has increased the relative attractiveness of Sterling. The National Treasury Management Agency has increased the amount of debt in Sterling by £750 million since the end of 1992.
I am satisfied that the National Treasury Management Agency will continue to keep the currency composition of the foreign debt under constant review in order to ensure that the overall mix of currencies reflects market conditions.
