Rose Conway-Walsh (Mayo, Sinn Fein)
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186.To ask the Minister for Finance to provide details on the reason why the stability programme update is projecting the increase of gross debt in nominal terms despite running a general government surplus; and if he will make a statement on the matter. [25161/24]

Michael McGrath (Cork South Central, Fianna Fail)
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The Stability Programme Update (SPU) published by my department in April forecasts an increase in nominal general government gross debt of €11.8 billion between 2023 and 2027. Over the same period, a general government surplus is forecast for each year to the cumulative value of €37.7 billion.

Movements in general government gross debt can be explained by the general government deficit/surplus and the so-called stock-flow adjustment (SFA).

While conceptually a general government surplus should contribute to a reduction in debt levels, this is not always the case; in a symmetric manner, a general government deficit does not necessarily translate into an increase in debt.

This is because changes in general government gross debt also reflect other elements, such as the financing of the acquisition of financial assets, which do not appear in the surplus/deficit figures. These other elements are included in the SFA.

To put it in practical terms, if the NTMA decides to issue more debt instruments because of favourable financial conditions, for instance, this will increase the debt irrespective of whether there is a budget surplus. These debt instruments will be used at a future date to finance maturing debt.

A breakdown of the items that contribute to the positive SFA is outlined in Table 17 in the SPU, with the other (2g) category being the largest. This category includes the accumulation of financial assets in the Future Ireland Fund, the Infrastructure, Climate and Nature Fund and the Social Insurance Fund.

Finally, it is important to stress that the accumulation of assets in such funds will contribute to improving the sustainability of the public finances.