Dáil Éireann Debate, Wednesday - 18 April 2012
146 Deputy Michael Healy-Rae asked the Minister for Finance given the news that our banking debt has risen to €63.7 billion, his views on whether the total debt will continue to grow month upon month to an impossible high that generations will not be able to pay and whether the debt may become completely unsustainable; and if he will make a statement on the matter. [18225/12]
View answerIt is the case that our General Government debt to GDP ratio has increased significantly in recent years. This is due to a combination of the sharp downturn in economic activity since 2007, four years of large budget deficits and the significant level of State support that it has been necessary to provide to the banking sector. Budget 2012 estimated the end-2011 General Government debt to GDP ratio at 107 per cent. By contrast, at end-2007, the ratio was just 25 per cent. Since 2009, the State has injected a gross sum of approximately €64 billion into the banking sector, equivalent to just over 40 per cent of 2011 GDP.
It must be borne in mind however that close to €21 billion of this was provided from the National Pensions Reserve Fund (NPRF) and so had no direct effect on General Government debt.
In addition, receipts from the fees for the Bank Guarantee, which amount to just under €2.9 billion so far, as well as a further €1 billion in Exchequer receipts from the sale of the part of the NPRF shareholding in Bank of Ireland have helped to mitigate this gross cost somewhat.
While acknowledging that the State's debt level is currently very high and has increased significantly over the last four years, in part due to the requirement to support the banking sector, the Government is implementing policies which both consolidate the budgetary position and foster economic growth. Stabilising the debt is one of Government's key policy objectives. It is my view that our debt is sustainable provided the correct policies are followed and implemented.
The Deputy will also be aware that in terms of banking related debt, the Government is keen to examine what can be done to lessen the impact on the sovereign of debt resulting from the banking crisis. A key part of this is to find the most cost effective way of resolving IBRC over the medium term. In this regard, technical discussions between officials are ongoing at present in relation to the IBRC Promissory Notes.
Budget 2012 estimated that the General Government debt to GDP ratio would increase further this year and next, peaking at just under 120 per cent in 2013, before declining to around 115 per cent by 2015. A revised estimated 2011 General Government debt outturn as well as updated forecasts for the period 2012-2015 will be contained in the forthcoming Stability Programme Update which will be published before the end of April.
