Having already been reduced in size twice, Quantitative Easing (QE) is now scheduled to run until at least September 2018. This was confirmed by the European Central Bank (ECB) at its most recent Governing Council meeting in January, when it stated that net asset purchases under the Programme are intended to run until the end of September 2018, or beyond if necessary. The Governing Council also repeated its expectation that key ECB interest rates will remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.
While it is not possible to predict the future path of ECB monetary policy or interest rates, the strategy of the National Treasury Management Agency (NTMA) in recent years has been to take advantage of the favourable market conditions for sovereign issuers wherever possible. Through taking pre-emptive action over the past three years, it has significantly improved our debt redemption profile in the coming years and lowered our debt interest bill.
The refinancing requirement over the period 2018 – 2020 has effectively been halved.
Through the early repayment of IMF and Swedish and Danish bilateral loans together with the early buyback and switching of near term maturing bonds for longer maturity bonds the 2018 – 2020 refinancing requirement has been reduced by some €16 billion, from €60 billion to €44 billion. Furthermore, reflecting the NTMA strategy of pre-funding, Exchequer cash balances stood at over €17 billion at the end of January.
In addition, the accelerated buy-back and replacement of Floating Rate Notes from the Central Bank of Ireland also locks in current interest rates.
These actions reduce refinancing risk for the Exchequer and offer insurance against the possibility of interest rate increases in the coming years.
Finally, I should also mention the positive impact these actions have had on the cost of servicing our National debt. The interest bill, which was as high as €7.5 billion as recently as 2014, fell to just under €6.1 billion last year.