Dáil Éireann Debate, Thursday - 18 May 2017
87. Deputy Michael McGrath asked the Minister for Finance to outline the way in which proceeds will be treated within the ISIF and the NTMA following the sale of a portion of the State's share in a bank (details supplied); if it is technically possible from a EUROSTAT perspective to transfer the proceeds to the discretionary portfolio within the ISIF; and if he will make a statement on the matter. [23830/17]
Amharc ar fhreagraAs I have previously stated for the Deputy in Parliamentary Question number 87 of the 09/03/2017 the proceeds from the partial disposal of AIB shares would, in the first instance, go to the ISIF. Such proceeds can then be transferred on to the Exchequer if the Minister for Finance so directs. In statistical terms, the disposal of shares will be a financial transaction, which means that the proceeds will not be recognised as general government revenue and will not improve the general government balance.
Regarding the sale of financial assets, these type of transactions do not result in a beneficial impact to the General Government Balance (GGB) under the European System of Accounts 2010 (ESA 2010) 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 Allied Irish Banks (AIB) would not count as general government revenue. Accordingly, if the proceeds are then used for general government expenditure at any time, the general government balance will worsen. If the proceeds are lodged to the Exchequer, then the NTMA will, in the normal course of events, take them into account in their funding plans and, all things being equal, it would result in Ireland’s Exchequer borrowing requirement reducing and, consequently, Ireland’s gross debt and debt to GDP ratio being reduced.
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. It is my view, therefore, that because public indebtedness rose partly due to the recapitalisation of the Banks, it is appropriate to use one-off revenue from divesting the State of its banking assets to reduce debt
