Bernard Durkan (Kildare North, Fine Gael)
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219. To ask the Minister for Finance the degree to which borrowing for capital or non-capital works here continues in line with the policy of the European Central Bank; and if he will make a statement on the matter. [46532/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I understand the Deputy is interested in Ireland’s borrowing and the monetary policy of the European Central Bank (ECB).

The National Treasury Management Agency (NTMA) borrows to meet the Exchequer’s Borrowing Requirement regardless of whether the ultimate expenditure is capital or non-capital in nature. It should be noted that current and capital expenditure in Ireland is funded through a combination of borrowing and taxation receipts. The NTMA has informed me that so far this year, it has issued €7bn of Government bonds. It issued a new 10-year benchmark bond via a syndicated transaction in January and held three dual bond auctions, the most recent of which was on 1 September.

At €7bn year-to-date, issuance is well below the levels seen in recent years as the impact of the covid-19 pandemic on the public finances unwinds and the Exchequer returns to a position of surplus on foot of strong tax revenues. The issuance was completed at a weighted average yield of just under 1.1% and a weighted average maturity of close to 15 years.

In terms of the factual position, the ECB has no role in determining the use of Exchequer expenditure (whether sourced from borrowing or taxation receipts). The Deputy will be aware that at the most recent meeting of the Governing Council, on 8 September 2022, the ECB decided to raise the three key ECB interest rates by 75 basis points.

The ECB has publicly indicated that, based on its current assessment, over the next several meetings the Governing Council expects to raise interest rates further to dampen demand and guard against the risk of a persistent upward shift in inflation expectations.

At the 8 September meeting the ECB also publicly announced that it intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the Asset Purchase Programme (APP) for an extended period of time past the date when it started raising the key ECB interest rates and, in any case, for as long as necessary to maintain ample liquidity conditions and an appropriate monetary policy stance. As concerns the Pandemic Emergency Purchase Programme (PEPP), the Governing Council intends to reinvest the principal payments from maturing securities purchased under the programme until at least the end of 2024. In any case, the future roll-off of the PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance. Redemptions coming due in the PEPP portfolio are being reinvested flexibly, with a view to countering risks to the monetary policy transmission mechanism related to the pandemic.

Bernard Durkan (Kildare North, Fine Gael)
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220. To ask the Minister for Finance the degree to which borrowing for capital or non-capital works here continues in line with the policy of the International Monetary Fund given Ireland’s indebtedness to the fund; and if he will make a statement on the matter. [46533/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I would like to clarify that Ireland has no outstanding loans to the IMF. On 20 December 2017, the National Treasury Management Agency (NTMA) completed the early repayment of the full loan under the IMF's Extended Fund Facility (EFF).

Bernard Durkan (Kildare North, Fine Gael)
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221. To ask the Minister for Finance the degree to which borrowing levels in this country comply with the requirements of those lending institutions to which Ireland appealed during the financial crisis whilst a programmed country; and if he will make a statement on the matter. [46534/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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The EU-IMF financial assistance programme for Ireland, formally agreed in late 2010, was a joint financing package in the amount of €85 billion and was made up of contributions from the International Monetary Fund (IMF), the European Union (EU), bilateral loans from the United Kingdom (UK), Sweden and Denmark, and Ireland own resources.

The €85 billion programme was financed as follows:

- €22.5 billion was provided by the IMF.

- from EU partners, the European Financial Stabilisation Mechanism) (EFSM) provided €22.5 billion and the European Financial Stability Facility (EFSF) €18.4 billion.

- €4.8 billion was provided by bilateral loans from UK, Sweden and Denmark.

- €17.5 billion was sourced from Ireland’s own resources (treasury and national pension reserve fund).

In December 2013, Ireland successfully exited the EU-IMF financial assistance programme, with the vast majority of policy conditions under the programme substantially fulfilled and market confidence restored.

Ireland’s loans from the IMF, together with the bilateral loans from Sweden, Denmark and the UK, have subsequently been repaid in full.

With the IMF and bilateral loans now fully repaid, four of the six loans that made up the programme of financial assistance are now repaid. The remaining programme-related debt is as follows:

- EFSM: €22.5 billion

- EFSF: €18.4 billion

While the programme loan agreements do not prescribe levels of borrowing or debt that Ireland must comply with, we will remain under Post Programme Surveillance until 75% of financial assistance has been repaid, which is expected to be in 2031. Under the repayment schedule, Ireland will finish repaying the remaining loans to the European Financial Stability Facility (EFSF) and European Financial Stabilisation Mechanism in 2042.

Sixteen Post Programme Surveillance missions to Ireland have taken place during this time, with the most recent mission having taken place in late March 2022. The Commission’s Staff Report for this mission was published in May.

Since the first mission to Ireland in early 2014, Post Programme Surveillance has marked the progress Ireland has made getting back on track after the EU-IMF programme. My officials and I consider Post Programme Surveillance to be an important ongoing two-way dialogue and partnership with the European institutions, the Commission and the European Central Bank as well as the European Stability Mechanism, which participates in the review missions for the purposes of its Early Warning System.

In the Post Programme Surveillance process, there generally is a high degree of consensus between the Irish authorities and the European institutions in relation to the challenges and risks facing Ireland, and it is beneficial to hear the views of the European institutions on an ongoing basis. In addition, the Commission’s staff report following each review mission is helpful, from the Irish authorities’ perspective, to hear an expert external view regarding some of the challenges and risks that we face as a country.

A key purpose of Post Programme Surveillance is to assess Ireland’s ability to repay outstanding programme loans. The Commission’s conclusions in its staff reports to date have been positive regarding Ireland’s capacity to repay. In this regard, the Commission most recent Staff Report for the 16^thPPS concluded that the risks to Ireland’s capacity to service its debt to the EFSM and EFSF are low.

The 17^thPost Programme Surveillance mission to Ireland is scheduled to take place in early October and I will continue to ensure that Ireland continues to fully comply with all Post Programme Surveillance obligations.

Bernard Durkan (Kildare North, Fine Gael)
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222. To ask the Minister for Finance the extent to which Ireland remains in a safe position in terms of borrowing to meet the current international crisis; and if he will make a statement on the matter. [46535/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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While public debt increased sharply during the Covid-19 pandemic, the strides that had been made in the years prior to the crisis, alongside the low interest rate environment, meant that the State could borrow sustainably to mitigate the worst economic impacts of the necessary public health restrictions. Similarly, Ireland’s quick rebound in economic growth following the pandemic, accompanied by strong tax revenue performance, will allow the Government to respond appropriately in the year ahead to the current energy crisis.

A key determinant of fiscal sustainability is, of course, the State’s ability to make repayments on the debt that it has borrowed. An environment of increasing interest rates has now commenced following a sustained period of low and even negative interest rates, and the European Central Bank has signalled that this will continue as long as inflation rates remain elevated. This means that interest rates will undoubtedly increase on any national debt issued in the coming years and on current national debt on variable interest rates.

However, Ireland’s starting position with regards to current financing costs is relatively favourable. The effective interest rate on the national debt is very low, with nearly three quarters of Ireland’s debt at an interest rate of 2 per cent or lower, the bulk of which is, importantly, at fixed rates. Additionally, the vast bulk of Irish debt is in the form of Government bonds, which tend to have a relatively long maturity profile, and around half of outstanding debt instruments are owned by domestic residents, providing additional insulation against adverse shocks.

Notwithstanding this favourable financing position, excessive borrowing at a time of increasing rates will erode the progress made in recent years with regards to fiscal sustainability. The debt ratio will have to be kept on a downward trajectory if we are to tackle the medium term challenges of the digital and climate transitions alongside the fiscal costs of an ageing population.