Rory O'Hanlon
Question:2 Dr. O'Hanlon asked the Minister for Finance the plans, if any, he has to end Exchequer borrowing in order to reduce the national debt of the country. [24152/96]
Ceisteanna—Questions. Priority Questions. - National Debt.
The Government's policy is to continue to reduce the burden of the national debt on the economy. To this end we intend to maintain the budgetary prudence followed in recent years. The combination of this policy, with the strong growth in the Irish economy, has delivered a significant reduction in the debt burden. The dramatic progress made in cutting the burden of debt can be demonstrated by the possibility that, at current exchange rates, the national debt may show an absolute reduction during the calendar year 1996 for the first time in nearly 40 years. I stress that this possibility is based on current exchange rates. This reduction would be the result of a very impressive budgetary performance, which will see the 1996 Exchequer borrowing requirement coming in significantly below target, combined with the impact of favourable exchange rate movements which have reduced the Irish pound value of our foreign debt. Even though this outcome would result partly from the movement of exchange rates, it is, nonetheless, a strong reflection of the level of fiscal consolidation being achieved.
This significant progress can be further illustrated by the likely reduction in the general Government debt to GDP ratio, the wider measure of debt relevant for Maastricht purposes. This ratio is expected to have declined from a peak of 117 per cent in 1987 to less than 75 per cent by the end of this year. With continued fiscal discipline, the welcome downward trend in the debt burden should continue into the future.
Will the Minister confirm if the national debt, having regard to its projected reduction at the end of 1996, will be less than when the Government came to power, given that its policy has been to reduce the national debt? Given that the stability pact requires our budget to be in balance in good economic times, how does the Government propose to do that?
We must await the outcome and provisions of the budget in that regard. I am sure the Deputy will be pleased that for the first time in 40 years a reduction in absolute terms is a strong possibility in terms of the outturn for 1996. Apart from that, the debt burden ratios have fallen substantially. The ratio of national debt as a percentage of GNP has fallen from 122.2 per cent in 1986 to a forecast figure of 82 per cent for 1996 and the general Government debt as a percentage of GDP has fallen from 116.8 per cent in 1986 to a forecast figure of 75 per cent for 1996. Leaving aside the aspect of a prospective reduction in absolute terms, they are substantial improvements in the debt ratios.
I agree we would all like to see a reduction in the national debt, but it is important to remember that although the Government took office when the economy was booming it added £1000 million to the national debt in its first year in office. What plans has the Government to reduce the Exchequer borrowing rate next year: the target set for this year was £729 million, 2 per cent of GNP? In view of the Central Bank's warning and given that the economy is doing well, what are the plans to reduce the percentage of GNP in terms of our Exchequer borrowing requirement for next year?
Indications are that there will be an appreciable undershoot in the EBR outturn for 1996. The Minister for Finance and the Government will take due cognisance of representations and comments made by the Central Bank and elsewhere on what the appropriate figure ought to be set at in the budget for 1997. Those representations and all appropriate relevant factors to the economy will also be taken into account by the Minister for Finance and the Government, having regard to social needs, the needs of our health and education services, taxation measures and so on. Those figures will be drawn together at budget time when the appropriate EBR target will be set for 1997 and we must await that outcome to know the figure.
Does the Minister support keeping the Exchequer borrowing rate at the outturn for 1996 or reducing it by 0.5 per cent next year?
I could not give an answer as it would be premature.
What is the Minister's view?
The Deputy would not be interested in my personal view on it.
I would.
I have a personal view in common with everyone else, but this is not the time or place to enunciate it. The budgetary figures, Exchequer requirements, likely outturns and the targets that will be set are matters for the budget and we must wait until next January to know what those figures will be.
We now come to deal with Priority Question No. 3 which can be taken in ordinary time.