Mr. Frank O'Connor:

I thank the committee for inviting me here today. The State is in a strong position to meet its borrowing requirements. The most important fundamentals for investors, in deciding whether to lend to Ireland and on what terms, have not changed: these are the country's growth potential and its fiscal policy over the long term.

In addition, there are a number of other factors that are supporting our ability to borrow. The first of these is the turnaround in the public finances. Ireland has run a primary surplus, that is, excluding interest costs, each year since 2014 and an overall surplus for each of the last two years. This has contributed to a steady pattern of improvements in our credit ratings. This is best illustrated by Standard and Poor's upgrade from A plus to double A minus last November, returning Ireland to the double A category for the first time since the troika programme in 2010. In doing so, this put Ireland closer to core eurozone issuers such as France and Belgium, which are both double A.

To put that in context, just five years ago Ireland was rated sub-investment grade by Moody's, which is seven notches lower than our current rating. The trend of improving credit ratings has increased the pool of potential buyers of Irish Government bonds. This is positive for demand and further enhances our ability to diversify our investor base. We have done this in a number of ways, including being one of the first European sovereigns to issue green bonds.

The second supportive factor is the extent to which Ireland's debt position has improved over the past five years. Ireland's stock of debt is high, a legacy of the financial crisis. However, our debt profile and the cost of servicing the debt are much more favourable than the recent past. By way of example, five years ago the average cost of our debt was 4%, but today it is less than 2%.

Five years ago, our annual interest bill was over €7.5 billion but today it is closer to €4 billion, a saving of €3.5 billion annually. That saving gives options to policymakers that would not have otherwise existed. Five years ago, we were facing into a period of very significant debt refinancing, involving what we called a series of debt chimneys, with a total refinancing requirement of €70 billion for the four-year period from 2017 to 2020. By contrast, having used the favourable interest rate environment to smoothen and lengthen our maturity profile, we have much lower refinancing due in the next four years. Total maturities over the 2021 to 2024 period will be just over €27 billion, or a little over a third of the figure for the previous four-year period. Next year, there will be no bond maturities because we had previously taken a strategic decision to leave 2021 as a so-called gap year. With no borrowing required for the purposes of refinancing, this increases our flexibility and gives us more options. All told, we have a smooth maturity profile ahead and at over ten years we have one of the longest average lives in Europe. Our stock of debt remains high but presents a much lower risk to our economy than was the case in recent years.

The third supportive factor is the current low interest rate environment and the accommodative monetary policy stance being taken by the ECB. The ECB has increased its bond buying programme to well over €1 trillion this year. With the introduction of its pandemic emergency purchase programme, the ECB waived its previously self-imposed 33% limit on the purchase of any euro area member's stock of government bonds. This and other policy actions increase the probability that borrowing rates for sovereigns in the euro area will remain low for the foreseeable future. What gives us additional confidence is the fact that our relative position has improved enormously. Unlike the last crisis, when Ireland was perceived as a peripheral credit by lenders, in today's environment investors consider Ireland as a semi-core borrower, reflecting our credit ratings relative to other eurozone issuers.

Notwithstanding the support that low interest rates provide, we have to remain alert to the risks in the medium to long term posed by possible rising interest rates. As the chief executive of the NTMA, Mr. Conor O'Kelly, said recently at the mid-year review, these conditions are unlikely to last forever and debt taken on at near-zero rates today will eventually need to be refinanced in the future, and potentially at a higher cost.

Covid-19 is undoubtedly today's urgent priority, but the higher debt burden that is necessary to deal with the challenge brings risks. We are comfortable with the outlook for the next four years or so but are mindful of the ten years beyond that and the need to plan for that period well in advance.

I will conclude by updating the committee on how the NTMA has stepped up borrowing activity in recent months in response to the change to the Exchequer's budgetary position. In April, we told the market that we were increasing our guidance for the year from a range of between €10 billion to €14 billion to a range of €20 billion to €24 billion. Following a successful €6 billion syndicated transaction last month, we have now raised €18.5 billion from the bond markets. This represents 84% of the mid-range of the higher range of €20 billion to €24 billion. It gives us significant flexibility and leaves us in a healthy position to meet our remaining requirements over the second half of 2020. I have included four graphs in the opening statement that we circulated to the committee to illustrate some of these points. That concludes my opening remarks and I would welcome any questions.