Dáil Éireann Debate, Tuesday - 23 April 2013
233. Deputy Pearse Doherty asked the Minister for Finance the amount of cash being held on balance by the National Treasury Managemnt Agency; the reason for this volume of this cash holding; if this cash is receiving any return for the State; the impact it would have on the interest spent on debt servicing, were the cash balance or a portion thereof be used to pay off the debt. [18719/13]
View answerAt end-March the Exchequer had €28.5 billion on hand in cash and deposits. The end-March cash position benefitted from the front-loaded market funding undertaken in the first quarter of the year - some â7.5 billion was raised from long-term Government bond issuance in the first quarter out of a planned total of €10 billion - as well as the proceeds of just over €1 billion from the sale of Bank of Ireland contingent capital notes in January. Funds in the Exchequer are used for all the ongoing payments necessary for running the State, which include debt redemptions. While the Exchequer had €28.5 billion on hand in cash and deposits at end-March, there was a €4.6 billion bond redemption on 18 April which has since reduced the cash position.
The State earns a return on these cash balances and deposits, which the NTMA manages in a prudent manner consistent with minimising risk and always having sufficient cash on hand to cover any volatility which might arise. Notwithstanding the progress made in stabilising and improving the public finances it remains the case that the State will continue to run large, though declining Exchequer deficits in the coming years. For example, Budget 2013 estimated the cumulative Exchequer deficit over the years 2013-2015 at close to €35 billion. While the sale of the Bank of Ireland contingent capital notes, sale of Irish Life and the replacement of the IBRC Promissory Note with long-term Government bonds will help to reduce this requirement, it will nonetheless remain significant.
In addition to these day-to-day costs and as referred to above, the Exchequer must have sufficient resources to repay debt redemptions, including the recent €4.6 billion Government bond repayment on 18 April and a €7.6 billion Government bond repayment in mid-January 2014. The continuing Exchequer deficits and debt redemptions must be adequately and prudently funded. Decisions on the level of cash reserves take account of various factors in addition to the cost of maintaining such reserves. These factors include the potential risks of not maintaining an adequate and prudent cash balance, including the risk that the Exchequer would be unable to meet its obligations and that market interest rates would possibly be higher than would otherwise be the case due to the perception that the State had a precarious liquidity position.
The State is well positioned to have 12-15 months of advance funding in place when the EU/IMF Programme comes to a conclusion at the end of 2013, a level of funding which the Troika have noted in their recent reports on Ireland's progress in implementing the terms of the Programme of assistance. It is necessary, for reasons of prudence and to assure investors that they will be repaid upon redemption, that the Exchequer maintains a sufficiently strong cash position at year end.
