Dáil Éireann Debate, Tuesday - 4 April 2017
76. Deputy Joan Burton asked the Minister for Finance when he expects the partial sale of a bank (details supplied) to be realised; if, in view of the shortage of capital investment here, he will commit to using the funds generated from the sale for essential capital investment; and if he will make a statement on the matter. [16370/17]
Amharc ar fhreagraAs I have indicated previously, an IPO is the optimal route to recouping value from our investment in Allied Irish Banks (AIB) and I have identified two potential windows for a sale in 2017. These are a window in May/June this year and a window in the Autumn. Fortunately we are under no pressure to sell and the timing will be influenced by market conditions.
As the Deputy will be aware, the Ireland Strategic Investment Fund (ISIF) holds the AIB shares on behalf of the State as part of its directed portfolio. It is important to note that payments from the ISIF to the Exchequer arising from the proceeds of the disposal of the State's shareholdings in the banks are provided for under Section 47, (4) of the NTMA (Amendment) Act 2014. This legislation allows the Minister to direct the NTMA to make such payments to the Exchequer in respect of the proceeds of any such disposal or to take other steps as set out in the section in respect of such proceeds.
Regarding the sale of financial assets, these types of transactions do not result in a beneficial impact to the General Government Balance under the European System of Accounts framework. This is due to the fact that it is classified as a 'financial transaction' whereby it is essentially the exchange of one form of asset (shares, equities, loans) for another kind (cash). Consequently the sale of any shareholding in AIB would not count as general government revenue. Thus there will not be an increased capacity to spend on capital projects as a result of the sale of shares in AIB without affecting the general government balance.
While not improving the deficit, cash proceeds arising from the sale of AIB shares that are transferred to the Exchequer would reduce the Exchequer borrowing requirement and result in lower general government debt. A lower level of debt is not only beneficial in terms of the fiscal sustainability of the State but would also result in reduced interest payments in future years. The strategy of reducing the national debt is consistent with the Government policy of repaying the borrowing previously undertaken to finance the recapitalisation of the banking sector during the financial crisis. As I have previously stated, it is my position that the proceeds from the sale of the State's shareholdings in Irish banks, including AIB, will be used to reduce the outstanding level of public debt.
