Tuesday, 17 December 2019

Questions (145)

Darragh O'Brien

Question:

145. Deputy Darragh O'Brien asked the Minister for Finance the potential impact of a €650 million increase in Home Building Finance Ireland borrowing on the general Government debt, general Government balance and calculations of available financial resource fiscal space under EU and national rules; and if he will make a statement on the matter. [53419/19]

View answer

Written answers (Question to Finance)

Home Building Finance Ireland (HBFI) was established in late 2018 with debt and equity funding of up to €750 million made available by the Ireland Strategic Investment Fund (ISIF) to HBFI for the achievement of its purposes at the direction of the Minister for Finance. 

HBFI has been classified within the general government sector by the Central Statistics Office.  Accordingly, its activity may impact on general government debt and the general government balance.  As the ISIF is also within general government, ISIF’s funding to HBFI has no impact on general government debt. 

The ISIF funding is in the form of an equity investment of €20 million, coupled with committed loans to HBFI of up to €730 million that will be provided on an on-going basis to meet HBFI’s lending needs as they arise.  It is currently expected that the funding available from ISIF will be sufficient to ensure that HBFI has the capacity to fund the delivery of up to 7,500 homes over a five-year period.  It is important to note that this funding may be recycled over the course of HBFI’s life. 

In the event that HBFI may require further funding it has the ability to raise this from other market sources through the issuance of bonds and securities on commercial terms.  Any such issuance will count towards general government debt. 

HBFI’s purpose is to provide financing to commercially viable residential property developments to increase the supply of new homes.  Such transactions are classified as financial transactions in the European System of Accounts 2010 statistical framework.  Financial transactions do not count as general government revenue or expenditure and, therefore, do not impact on the general government balance. 

The Irish public sector remains highly indebted.  In modified gross national income (GNI*) terms, a better barometer of debt sustainability than debt-to-GDP, our debt ratio in 2019 is over 100 per cent.  HBFI borrowings of €650m would increase this by c. 0.3 percentage points.