Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Officials in my Department have clarified with the Deputy that he is seeking information on general Government debt.

The State's debt burden has increased substantially over the last number of years as a result of the collapse in revenues and the significant increase in cyclical unemployment and debt servicing related expenditure arising from the sharp contraction in economic activity, the structurally high level of expenditure and the substantial level of State support to the banking sector.

One of the primary objectives of the Government is to stabilise the debt-to-GDP ratio and reduce it to a lower, safer level over time. This will be done through the implementation of further budgetary consolidation as well as policies which foster employment and economic growth. The updated Medium-Term Fiscal Statement, published yesterday, forecasts that the debt-to-GDP ratio will peak next year at 121% and will begin to decline in the following years. This is a result of a combination of factors, including the strengthening of nominal GDP as a result of the implementation of further growth-enhancing policy measures; the achievement of a general Government primary surplus, that is, an excess of revenue over expenditure excluding interest expenditure, by 2014; and a run-down of cash balances in future years, meaning part of the annual Exchequer borrowing requirement is funded without need for additional borrowing but is instead funded through resources to hand.

It is also worth taking into account the State’s net debt position when looking at debt sustainability. General Government debt is a gross measure that does not allow for the offsetting of cash balances and other related assets. Netting off the estimated €18.5 billion in cash and deposits held by the Exchequer at the end of 2012 would result in a net Government debt of the order of 106% of GDP at the end of 2012. This is still an elevated level but one which is significantly below the gross debt ratio.

Additional information not given on the floor of the House.

One indicator of debt sustainability that is worth noting is the proportion of revenues that are directed to servicing the interest on the debt. Based on the MTFS projections, it is estimated that 11.4% of general Government revenue will be required to service the debt this year. This ratio is forecast to increase further next year before stabilising at around 16%. While this is clearly a significant level, it is worth bearing in mind that this is well below the ratio experienced during the mid-1980s, where interest expenditure accounted for over 20% of revenues.

My view is that our debt, though elevated, is sustainable. The Government is strongly committed to stabilising and reducing the debt ratio over time. An important part of that strategy is of course the banking related debt and technical work is ongoing in that regard. There is a widespread recognition of the impact banking debt has had on the sovereign, which has been acknowledged in the commitment that the"situation of the Irish financial sector would be examined with the view of further improving the sustainability of the well performing adjustment Programme. I can assure the Deputy, as I have said many times, that the Government will continue to be ambitious in the negotiations and seek to agree the best possible outcome for the Irish taxpayer.

General Government debt was €144 billion in 2010 and €169 billion in 2011. In respect of the period 2012-14, my Department projects that the debt will be €192 billion, €204 billion and €210 billion, respectively. Interest expenditure in respect of this debt was €5 billion and €5.3 billion in 2010 and 2011, respectively. It is projected to be €6.4 billion this year before rising to €9.4 billion in 2013 and to €9.7 billion in 2014. The large increase next year reflects the expiry of the interest holiday on the promissory note.

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