Dáil Éireann Debate, Tuesday - 27 March 2018
73. Deputy Dara Calleary asked the Minister for Finance the fiscal rules surrounding the expected surplus from NAMA; if it will be considered a financial transaction; if it will be possible to utilise the proceeds for expenditure without impact on the expenditure benchmark; and if he will make a statement on the matter. [13128/18]
Amharc ar fhreagraNAMA was established in December 2009 and its debts of nearly €32 billion represented a substantial contingent liability to the State.
The State recapitalised the domestic banking system at a gross cost of €64 billion, adding around 40 per cent of GDP to national debt. As a result of this, as well as the mismanagement of the public finances, total government debt now stands at over €200 billion; this is the equivalent of over €40,000 for every man, woman and child in the State.
My priority, therefore, is to use revenue windfalls to reduce the debt incurred by public support for the banking system.
Moreover, I am also very conscious that the economy is approaching full employment and it is important that the stance of budgetary policy reflects this - I will not adopt pro-cyclical policies that endanger our recovery.
NAMA currently projects a surplus in the region of €3bn to be returned to the State once it completes its work. Surplus funds may only be returned to the Central Fund once NAMA's senior and subordinated debt has been redeemed in full. NAMA announced in October 2017 that it had redeemed all of its €30.2bn in senior debt, which was guaranteed by the State, but €1.6bn of subordinated debt is still outstanding.
In order to keep the activities of NAMA off-balance sheet, a special purpose vehicle or SPV was established and it holds the debt. The State owns 49% of the SPV, through another entity called NAMA, with the other 51% privately owned. From a statistical perspective, once the senior debt, subordinated debt, and private investors have been repaid then the State would be the sole shareholder and the NAMA SPV would then become classified into the general government sector, having no effect on the general government balance. This is expected to occur in 2020 and at that point in time NAMA will have no debt.
Under the European System of Accounts 2010, any NAMA surplus paid to the Exchequer will be considered a financial transaction. So while it will be Exchequer positive, it will not impact the general government balance. Therefore any resulting expenditure will worsen both the general government and the structural balances. Whether such expenditure would be compatible with the limits set by the expenditure benchmark can only be determined under the conditions that prevail at the time.
