Written answers
Wednesday, 13 February 2013
Department of Finance
General Government Debt
Pearse Doherty (Donegal South West, Sinn Fein)
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To ask the Minister for Finance if he will set out in tabular form, by year, for 2013 onwards, the forecast impact on general government deficit and general government debt of the proposed new scheme to substitute the promissory notes provided to the Irish Bank Resolution Corporation with sovereign and NAMA bonds. [7720/13]
Michael Noonan (Limerick City, Fine Gael)
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As the Deputy will be aware the Irish Government Bonds that have been issued in exchange for the Promissory Notes are floating rate bonds. The coupon on these bonds is 6-month Euribor plus a margin ranging from 2.50% to 2.68%. Given the nature of this floating rate it is impossible to be accurate with regard to the exact interest cost in 2013 to 2015.
Information was released by the Department of Finance last week analysing the impact of the transaction on the general government deficit and debt over the period 2013 – 2015. As part of the explanatory information that was released, estimates were produced which showed interest costs for 2013-2015 and ELG costs for 2013.
The following tables set out the impact of the transaction on general government deficit (GGB) and general government debt (GGD) based upon no policy change.
| General Government Deficit Impact (€M) | 2013 | 2014 | 2015 |
|---|---|---|---|
| Underlying GGB per Budget 2013 document | (12,645) | (8,905) | (5,325) |
| Adjustments | |||
| 1.Promissory Notes - interest savings | 1,875 | 1,775 | 1,675 |
| 2.Government Bonds – interest costs | (800) | (875) | (950) |
| 3.ELG claim costs* | (1,000) | - | - |
| 4.Interest cost of payments under ELG | (50) | (50) | (50) |
| 5.Change in CBI surplus dividend income | - | 50 | 125 |
| 6.Interest cost savings (incl. interest on interest) | - | 100 | 225 |
| 7.NAMA true-up** | n.a. | n.a. | n.a. |
| Change in underlying GGB due to transaction | 25 | 1,000 | 1,025 |
| Underlying GGB post-transaction | (12,620) | (7,905) | (4,300) |
| Pre-Transaction Underlying GGB/Nominal GDP | (7.5%) | (5.1%) | (2.9%) |
| Post-Transaction Underlying GGB/Nominal GDP | (7.5%) | (4.5%) | (2.4%) |
| Change | 0.0% | 0.6% | 0.6% *Estimated ELG claim range: €0.9 - €1.1billion |
** Unknown until end of valuation process
Note: Budget 2013 forecasts assume no dividends paid by IBRC to the State; table may contain rounding differences and figures are rounded to nearest €25 million; future interest costs to determine the financial impacts are best estimates
General Government Debt Impact (€M)201320142015
| GGD per Budget 2013 document | 203,500 | 209,200 | 211,900 |
|---|---|---|---|
| Adjustments | |||
| 1.Promissory Notes - interest savings | (500) | (1,825) | (1,750) |
| 2.Government Bonds – interest costs | 800 | 875 | 950 |
| 3.ELG claim costs* | 1,000 | - | - |
| 4.Interest cost of payments under ELG | 50 | 50 | 50 |
| 5.Change in CBI surplus dividend income | - | (50) | (125) |
| 6.Interest cost savings (incl. interest on interest) | - | (100) | (225) |
| 7.NAMA true-up** | n.a. | n.a. | n.a. |
| Change in GGD in year | 1,350 | (1,050) | (1,100) |
| Cumulative change in GGD | 1,350 | 300 | (800) |
| GGD post-transaction | 204,850 | 209,500 | 211,100 |
| Pre-Transaction Underlying GGB/Nominal GDP | 121.3% | 120.2% | 116.8% |
| Post-Transaction Underlying GGB/Nominal GDP | 122.1% | 120.3% | 116.4% |
| Change | 0.8% | 0.2% | (0.4%) *Estimated ELG claim range: €0.9 - €1.1billion |
** Unknown until end of valuation process
Note: Budget 2013 forecasts assume no dividends paid by IBRC to the State; table may contain rounding differences and figures are rounded to nearest €25 million; future interest costs to determine the financial impacts are best estimates
Note that the tables showing the GGB and GGD impacts assume that the full portfolio of Government bonds are priced at an interest margin of 270 basis points over 6-month EURIBOR. The Government bond portfolios were ultimately priced at a range of different interest margins over 6-month EURIBOR.
Copies of this material is available on the Department of Finance website under the following links:http://www.finance.gov.ie/viewdoc.asp?DocID=7543 http://www.finance.gov.ie/viewdoc.asp?DocID=7545
The Department has not produced figures for the Debt and Deficit effects beyond 2015.
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