Dáil Éireann Debate, Wednesday - 5 July 2017
41. Deputy Thomas P. Broughan asked the Minister for Finance his plans with regard to a proposed rainy day fund and the debt-to-GDP short-term and medium-term targets; and if he will make a statement on the matter. [31350/17]
View answer65. Deputy Michael McGrath asked the Minister for Finance if he is committed to the 45% debt-to-GDP target outlined in budget 2017 by his predecessor; the way in which he plans to meet this target by 2025; and if he will make a statement on the matter. [31244/17]
View answer70. Deputy Michael McGrath asked the Minister for Finance his position regarding the setting up of a rainy day fund in 2019; if he is committed to it being set up; the way in which he sees it being implemented; and if he will make a statement on the matter. [31242/17]
View answerI propose to take Questions Nos. 41, 65 and 70 together.
As part of the 2016 Summer Economic Statement, the Government announced its intention to establish a contingency reserve/rainy day fund with effect from 2019. The crisis years clearly demonstrated that volatility in the economic cycle can be much more pronounced due to the open nature of the Irish economy. As such, the rainy day fund would provide a prudent counter-cyclical buffer, with annual transfers from the Exchequer to the rainy day fund expected following the achievement of the Medium Term Budgetary Objective, projected to be next year.
The rainy day fund is currently under review and further information will be provided in the Summer Economic Statement (SES) to be published in July.
Additionally, a revised lower debt target of 45 per cent of GDP was announced in Budget 2017, intended to help to provide an additional fiscal 'shock absorber' capacity to the public finances to help deal with future economic headwinds, including the impact of Brexit. Again, this target is under review and updated information will be included in the SES.
My Department published a report in June entitled the "Annual Report on Public Debt in Ireland”, and included an illustrative scenario for the debt path over the medium term. On the basis of reasonable assumptions, it is projected that the debt-to-GDP ratio of 60 per cent would be achieved in 2022, 55 per cent in 2023/2024 and 45 per cent in 2026. The analysis also suggests that, based on continued compliance with the fiscal rules, growth in the nominal GDP is expected to do the heavy lifting in reducing the debt-to-GDP ratio in the coming years.
This projected timing does not factor in proceeds from the sale of banking assets, which will be used to lower debt and thus could bring forward the achievement of the above ratios.
The report also contains an analysis of the debt path under different economic and other scenarios.
