Timmy Dooley (Clare, Fianna Fail)
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201. To ask the Minister for Finance the cost of pre-funding in 2013 the Exchequer borrowing requirement for 2014; and if he will make a statement on the matter. [39567/13]

Michael Noonan (Limerick City, Fine Gael)
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The proceeds of all borrowings by the Exchequer, including borrowing under the EU/IMF programme, as well as tax revenues, non-tax revenues and other receipts, are lodged to the Exchequer account at the Central Bank of Ireland to fund on-going Government expenditure. There are constant flows into and out of the Exchequer account and all moneys within it are fungible. The Government must ensure through its management of expenditure, tax and non-tax receipts and borrowings that there are prudent and adequate balances in the Exchequer account at all times. This also provides investors with the assurance they require that they will be repaid upon the redemption of debt. For small open economies such as Ireland, budgetary aggregates are generally more susceptible to the negative effects of external and internal shocks. In general terms the overall level of cash reserves held depends on the State's risk appetite in relation to such shocks. Particular factors which arise in that context include the international economic situation, the State's debt maturity profile and the projected pattern of Exchequer receipts and expenditure. In Ireland, where we are seeking to achieve sustainable access to the debt markets while still running a significant budget deficit, the need to hold appropriate cash balances as we emerge from the EU/IMF programme is paramount. In line with this, the Troika's funding projections for Ireland envisage sufficient cash in hand as at the end of the programme in December 2013 to cover the Exchequer's full needs for the calendar year 2014.

The April 2013 Stability Programme Update forecasts estimated the cumulative Exchequer deficit over the years 2013-2015 at some €25 billion, with the 2014 deficit estimated at just under €9 billion. In fact with 40% of the 2014 EBR forecasted to accrue in the first quarter along with the significant bond redemption of €6.85 billion in January 2014, much of the prefunded cash balances will be utilised in the first 3 months of 2014. Indeed visibility as to our 2014 funding is essential if Ireland is to successfully exit the programme on schedule.

Decisions on the level of cash reserves take account of various factors in addition to the cost of maintaining such reserves. These factors include the potential risks of not maintaining an adequate and prudent cash balance, including the risk that the Exchequer would be unable to meet its obligations and that market funding rates for Ireland would therefore be higher than would otherwise be the case due to the perception that the State had a precarious liquidity position.

The State earns a return on these cash balances and deposits, which the National Treasury Management Agency (NTMA) manages in a prudent manner consistent with minimising risk and always having sufficient cash on hand to cover any volatility which might arise. I am informed by the NTMA that they have calculated that, during 2013, based on bond issuance yields and the cost of funding under the EU-IMF Programme, the net interest differential (cost) on the cash balances held is in the region of 2.7% which equates to about €2.2 million per month for each €1 billion borrowed. The key elements of the marginal cost of funds in 2013 include the two long-term bond syndications done in early 2013, the pooled funds received from the EFSF and disbursements received from the IMF, United Kingdom, Sweden and Denmark. The NTMA continues to keep the quantum, maturity and timing of market funding under review based on its assessment of what is required to regain full market access and the overall level of cash balances that it is prudent to maintain.

It is the intention to run lower cash balances in the coming years, once sustainable market access has been established.