Written Answers. - Exchequer Funds.
Dan Neville
Question:
89
Mr. Neville
asked the
Minister for Finance
the resources he believes will remain for transfer to the Exchequer by the end of 2002 from the Social Insurance Fund, from Central Bank external reserves and from debt sinking funds; and his views on whether such resources should be transferred to the Exchequer.
[14440/02]
It is currently projected that the accumulated surplus in the Social Insurance Fund at the end of 2002 will be €1.3 billion. Any future transfer would be a matter for consideration in the context of future budgets.
When discussing the issue of the Central Bank's reserves, it is important to specify the reserves in question. The official external reserves are principally composed of the foreign currency assets of the Central Bank. In the Central Bank's balance sheet, the bank's total assets, including its external reserves, have a counterpart in liabilities. These liabilities include banknotes in circulation, credit institution and Government deposits and the bank's capital. However, the bank does have accounting reserves which have been accumulated by the bank over the years from income earned from its operations. As of end 2001, they stood at €1,475 million. The bank also has a revaluation account, which reflects unrealised gains from valuation changes; this acts in effect as a contingency provision against currency and other market fluctuations.
The accumulated accounting reserves of a central bank contribute to its credibility and the appropriate level of these reserves is a prudential matter. Of course, an event such as the changeover to the euro, which has had such a large effect on the financial system, naturally gives rise to some consideration of the role and purpose of the accounting reserves. I therefore took the opportunity late last year to invite the board of the Central Bank to consider whether a portion of its accounting reserves might be made available to the State. In its reply the board indicated that, when the changeover to the euro was completed, it would conduct a review of the level of accounting reserves. I will examine the results of this review when they become available.
Budget 2002 also projects a transfer to the Exchequer from the Central Bank of €240 million in 2002 in respect of unredeemed Irish banknotes written off by the Central Bank following the changeover to the euro. There may be scope for a smaller transfer in this regard in 2003 or later years depending on the volume of Irish bank notes still outstanding. This is a matter for consideration in the context of future budgets in conjunction with the Central Bank.
There was a €750 million balance in the capital services redemption account at the end of 2001, €500 million is to be used for debt service purposes in 2002 and the remaining €250 million for debt service in 2003 as provided for in budget 2002.
