The Minister for Finance is empowered under the State Guarantees Act, 1954, to guarantee borrowings by Aer Lingus up to a maximum of £5 million. Borrowings for capital development by State bodies from sources other than the Exchequer are to be welcomed—provided, of course, that the terms are reasonable. Such borrowings afford a measure of relief to the Exchequer in the task of financing the State capital programme.
Aer Lingus is at present negotiating a loan on the New York market. The principal and repayment terms of the loan are expressed in dollars. The law officers have advised that, having regard to the provisions of the Currency Act, 1927, guarantees under the State Guarantees Act 1954 must be in Irish pounds because that Act does not provide explicity for guarantees of borrowings made in any other currency. This Bill proposes to remedy this defect and will enable the Minister for Finance to guarantee foreign borrowing by any of the bodies scheduled to the principal Act. At present there are only four bodies so scheduled and Aer Lingus is the only one contemplating foreign borrowing. All existing guarantees given under the principal Act are in respect of borrowings in Irish currency and are not affected by the Bill.
The procedure for adding a body to the Schedule of the Principal Act involves the making of an Order by the Government, a draft of which must be laid before and formally approved by each House of the Oireachtas. Thus, additional bodies cannot avail of the benefits of the Bill to borrow abroad without the Oireachtas first agreeing to a Scheduling Order.
Section 2 of the Bill provides that the Minister for Finance may guarantee borrowings in a foreign currency by a scheduled body.
Section 3 sets out the procedure for determining the foreign currency equivalents of the amounts specified in the Schedule to the 1954 Act and of the Irish currency equivalent of any payment in a foreign currency which the Minister for Finance may be called upon to make under a guarantee. The amounts specified in the Schedule fix the maximum amount of principal in Irish currency which may be guaranteed at any one time, and, in the case of foreign borrowing, the corresponding foreign currency equivalent will be determined by reference to the par rate of exchange ruling at the date on which the guarantee is given. Where the Minister for Finance may have to honour a guarantee in respect of a loan expressed in a foreign currency the amount of Irish currency required to meet the guarantee will be determined by reference to the rate of exchange ruling at the time the guarantee has to be met. I should point out that this means that in the event of a currency devaluation by this country the cost, in Irish currency, of meeting such a guarantee would increase and, conversely, would be less if a revaluation occurred. A similar situation would also arise if the foreign currency in which a guaranteed loan was expressed was either revalued or devalued.
Section 4 increases from £5 million to £6 million the amount of borrowing by Aer Lingus which may be guaranteed by the Minister for Finance. The Company is at present negotiating a loan for $15 million, equivalent to £5,357,143 in Irish currency. As the terms of the loan are reasonable it is desirable to increase the authorised amount which may be guaranteed by the Minister for Finance so as to enable the company to avail of the full amount on offer.
I recommend the Bill to the House.
