Dáil Éireann debate -
Tuesday, 23 Jan 1996

Vol. 460 No. 3

Written Answers. - National Debt.

Dermot Ahern

Question:

125 Mr. D. Ahern asked the Minister for Finance the reason for the reported increase of one billion pounds in the national debt in view of the fact that the budgetary situation has now stabilised; and if he will make a statement on the matter. [19373/96]

Minister for Finance (Mr. Quinn)

The national debt actually increased by £983 million in 1995. The factors accounting for this increase were as follows:

	£m
Exchequer Borrowing Requirement	627
Exchange rate movements	267
Discounts/Premia on Domestic Bond issues, etc.	160
Increase in Capital Services Redemption Account balance	-67
Other movements	-4
Total increase in debt	983

The Deputy will note that the Exchequer Borrowing Requirement was the main factor responsible for the increase in national debt in 1995. Adverse exchange rate movements, which raise the price of foreign debt in domestic currency terms, also made a significant contribution to this increase. However, in the case of borrowings in currencies such as the yen, Deutsch Mark and the Swiss franc, lower interest rates would provide an offset.

The heading "Discounts/Premia on Domestic Bond issues, etc." refers to the net effect of issuing bonds above or below par value — thus, a bond issued at a discount would result in an addition to the national debt greater than the actual amount received for the bond. This arises because the amount included in the national debt is not the market value of the debt but the capital amount payable on redemption even when the redemption date is a number of years away. The extent of discounts or premia in any period is largely a reflection of current market conditions.

The increase in cash balances in the Capital Services Redemption Account reduced the net addition to the national debt required to fund the 1995 EBR and is, therefore, a deduction from the debt as derived from the headline EBR figure in the above table.