Dáil Éireann Debate, Thursday - 13 July 2017
190. Deputy Michael McGrath asked the Minister for Finance if the estimated €3 billion surplus due to be paid to the State by NAMA can be spent outside of fiscal rules; if it must be used to reduce the national debt; and if he will make a statement on the matter. [34258/17]
View answerThe fiscal rules are designed to promote budgetary discipline and underpin sustainable economic growth. While Ireland's economy is growing and debt is on a downward trajectory, the debt level is still comparably high and caution must be exercised due to the potential of roll-over risk should interest rates increase. We are a small and very open economy in a world that has more risks than usual. Compliance with the fiscal rules underpins the Government’s objective of maintaining sound public finances. Furthermore, any additional expenditure outside of the limits set by the expenditure benchmark could result in a deviation under the fiscal rules which, if the State does not take effective action within a relevant deadline, could result in the European Commission applying an interest bearing deposit. Additionally, aside from financial penalties there could be a potential for adverse debt market outcomes and reduced confidence in the Irish economy.
Currently NAMA expects to redeem 100% of its guaranteed senior debt by the end of 2017 and expects to redeem its subordinated debt in March 2020. NAMA will focus on completing its ongoing deleveraging, its Dublin Docklands SDZ and residential funding programmes in the interim period to 2020. NAMA's 2016 Annual Report which provides further insight into the Agency's expectations regarding these activities was laid before the Oireachtas on 1 June 2017 and is also available on NAMA's website via: https://www.nama.ie/about-us/publications/annual-reports/. As the Deputy will be aware, it is through the successful completion of these objectives that NAMA currently projects a surplus in the region of €3 bn to be returned to the State once it completes it work.
As per section 60(2) of the NAMA Act 2009, NAMA may use surplus funds to redeem and cancel its debt. Surplus funds may only be returned to the Central Fund once NAMA's debt has been redeemed in full.
As has been discussed with EUROSTAT, from an accounting perspective, once the senior debt, subordinated debt, and private investors have been repaid then NAMA (the Agency), which is in Government, would be the sole shareholder and, as such, NAMA (the SPV) would then become classified into the Government sector. This is expected to occur in 2020, no later than the time at which the private shareholders have been fully compensated. At this point in time NAMA will have no debt.
It will be a decision for the Government as to how any surplus returned by NAMA will be utilised within the fiscal rules. It should further be noted that at this point, according to most recent estimates, there will be in the order of €3.4 bn net fiscal space available to the Government.
It has always been the Government's intention to use such receipts from the resolution of the financial sector crisis to pay down our debt and help reduce our debt servicing costs. Given the uncertainty around the specific timing of or the amount that will be realised, such receipts have not been included in our debt forecasts. Debt reduction underpinned by the Government's lower gross general government debt target of 55 per cent of GDP, will increase the resilience of the public finances to deal with any potential shocks which may emerge.
