Dáil Éireann debate -
Thursday, 20 Mar 1997

Vol. 476 No. 6

Written Answers. - National Debt.

Liz O'Donnell

Question:

12 Ms O'Donnell asked the Minister for Finance the growth in the national debt for each of the years from 1993 to 1996; the cost in each of those years of servicing the national debt; and if he will make a statement on the matter. [7689/97]

Minister for Finance (Mr. Quinn)

The following are the figures requested by the Deputy:

	National Debt at end year	Change in National Debt	Change in National Debt	Debt Service
	(£m)	(£m)	(%)	(£m)
1992	26,344
1993	28,358	2,014	7.6	2,390
1994	29,227	869	3.1	2,227
1995	30,209	982	3.4	2,405
1996	29,912	–297	–1.0	2,360

In general, the main factor affecting the year-on-year change in the national debt is the Exchequer borrowing requirement. However, other factors such as discounts or premiums on bonds issued and, in particular, exchange rate movements can also affect the stock of debt outstanding.

The impact of exchange rate movements was particularly large in 1993 when the realignment of the Irish pound in January of that year added almost £1.4 billion to the Irish pound value of foreign currency denominated debt. Exchange rate movements were also particularly significant last year when the appreciation of the Irish pound reduced the Irish pound value of the foreign currency debt by some £850 million which, combined with the low EBR outturn, facilitated a reduction in the absolute level of the national debt — the first such fall in almost 40 years.

The Deputy will appreciate, however, that the most important indicator of debt is the ratio of debt to GNP or GDP which measures the burden of debt on the economy and the economy's capacity to shoulder it. In this regard, the ratio of the national debt to GNP has fallen from 98.5 per cent in 1993 to 82.0 per cent by the end of 1996. Over the same period, general Government debt as a proportion of GDP, which is the relevant measure for Maastricht purposes, has fallen from 94.5 per cent to 72.8 per cent and is now in line with the EU average.

Notwithstanding the increase in the absolute level of debt outstanding since 1993, the Exchequer debt service costs have remained quite stable and, indeed, were lower in 1996 than in 1993. Furthermore, as a proportion of GNP, debt service costs have fallen from 8.3 per cent in 1993 to 6.5 per cent in 1996. This reflects both rapid economic growth and falling interest rates and bond yields as the financial markets reward Ireland for a succession of low budget deficits and a track record of sound fiscal management.