The cost of repaying interest on Irish national debt will rise from 3.8% of tax revenues in 2008 to 18.7% in 2013, according to the State agency, the National Treasury Management Agency (NTMA). Separately, the National Pensions Fund achieved a return of 1.3% in the first half of 2009.

In its annual report for 2008, the NTMA said while the burden of interest repayments will increase "it will be no greater than the levels experienced in the mid-1990s.”

That isn't much of a reassurance, given that the reduction in the national debt during the Celtic Tiger period, has been only temporary due to monumental economic mismanagement.

In 2009, the NTMA has raised €22.7 billion from the bond markets out of total borrowing requirement for the State of €25 billion. Further bond auctions are planning between now and November.

The NTMA said it had built up end-year Exchequer balances to €21.4 billion, ensuring ample liquidity for early 2009. Exchequer cash balances currently stand at around €25 billion.

Chief executive of the NTMA, Dr Michael Somers commented today that there had never been any question that the State would not repay what was borrowed. Part of the reason for the change in sentiment was the fact that the NTMA has kept a “huge mountain” of €25 billion in cash available meaning it can easily meet any repayment demands.

A second factor was that even now, Ireland’s debt to GDP ratio was relatively low relative to other Eurozone  member states.

At the end of 2008, 82% of Government debt was held by international investors.

The NTMA said the national debt had increased from €37.6 billion at the end of 2007 to €50.8 billion at the end of last year - - a debt ratio to gross domestic product ratio of 43.2% compared with the Eurozone average of 69.3%.

Ireland’s debt to gross domestic product ratio is expected to rise to 73% in 2010, according to the NTMA.

National Pensions Reserve Fund

The National Pensions Reserve Fund secured a return of 9.4% during the second quarter of 2009. Over the first six months of the year, the Fund secured a return of 1.3%.  Since inception, the annualised performance of the total Fund is 0.6%.  At 30 June 2009 the Fund’s value stood at €19.4 billion.

In calculating the performance of the Fund, a distinction is now drawn between the performance of the Fund’s Discretionary Portfolio and the Fund’s Directed Investments ie. investments in AIB Bank and Bank of Ireland. 

The Discretionary Portfolio used to account for 100% of the value of the Fund.  However, as a result of the Fund’s investments in Bank of Ireland and AIB at the direction of the Minister for Finance, the Discretionary Portfolio accounted for 63.9% of the value of the Fund at 30 June 2009.

The second quarter return of 12.2% on the Discretionary Portfolio was driven by the performance of its equity investments with global markets rallying sharply from their March lows as the pace of economic contraction slowed.  The effects of official intervention through support for money markets and direct fiscal stimulus were increasingly felt and many indicators of financial stress moderated, with evidence of decreasing risk aversion and greater stability.