Government Bonds

Dáil Éireann Debate, Tuesday - 21 May 2013

Tuesday, 21 May 2013

Questions (268)

Pearse Doherty

Question:

268. Deputy Pearse Doherty asked the Minister for Finance if he will detail as part of his Department of Finance’s budgetary calculations if the figure of €800 million for 2013, €875 million for 2014 and €950 Million for 2015 in interest costs cited in the Department of Finance Pro Forma Transaction Impact Analysis – State Finances (Based on No Policy Change) document for those years are interest payments which his Department expect to be returned to the state from the Central Bank of Ireland profits after earnings at the end of 2013, 2014 and 2015 as part of their budgetary accounting for those years; if he will confirm if the full interest payments on these bonds as cited in the aforementioned document are not expected as part of his Department's calculations to be returned to the Exchequer as profits from the Central Bank of Ireland; if he will detail the calculations by his Department of the total profits expected to be returned from the Central Bank of Ireland to the Exchequer for 2013, 2014 and 2015; and if he will make a statement on the matter. [24256/13]

Written answers

Minister for Finance

The interest costs paid by the State on the newly issued Government bonds will contribute to the surplus income of the Central Bank. As explained in Note 5 in the Explanation of Adjustments in the Pro Forma Transaction Impact Analysis, 80% of Central Bank surplus income is paid to the State as a dividend the following year. So, 80% of the contribution to the Central Banks surplus income in 2013 from the newly issued Government bonds will be paid over in 2014 and so on. However, as the Deputy will be aware this new Central Bank income replaces surplus income arising from IBRC's Exceptional Liquidity Assistance (ELA) funding arrangement. The Pro Forma Transaction Impact Analysis clearly outlines the estimated net benefit to Central Bank income as a result of the promissory note restructuring.

Turning specifically to the estimated dividend payment from the Central Bank of Ireland to the Exchequer, the estimate which underpinned Budget 2013 of €1,040m was published as part of the Exchequer Borrowing Profile with the February Exchequer Returns. Since that time, the Central Bank have revised this figure upward to €1,148m which has been reflected in the SPU arithmetic.

Beyond this year, the estimates for the additional Central Bank surplus income arising from the promissory note restructuring as published in the Pro-Forma Analysis remain broadly valid although as the coupon paid on the replacement bonds is based on a floating rate, it would not be surprising if these estimates changed over time. In respect of 2013 interest costs on the newly issued bonds, the current estimate is €700m compared to the original estimate of €800m. The original estimate was based on the assumption that the transaction would take place on 1 January 2013. The Central Bank is in the process of revising their estimate for dividends for 2014 and subsequent years.