Ireland’s national debt could approach €250 billion by the 2030s, the head of the National Treasury Management Agency (NTMA) will tell an Oireachtas committee on Thursday.
NTMA chief executive Frank O’Connor is expected to warn the Dáil Public Accounts Committee (PAC) that such a level of debt carries risk and that the era of the State borrowing money at low interest rates was over.
He will say the State needs to be prepared to pay higher costs in the future.
O’Connor is expected to say that, when the NTMA was established 35 years ago, Ireland had a national debt of about €30 billion.
“That was seen as high then. But today it is over €200 billion – and by the 2030s will potentially be approaching a quarter of a trillion euro. While the population and the size of the economy have grown since then, it is still a very high level of indebtedness.
“That level of debt carries risk. It is not something that we, as debt managers, can afford to be complacent about. And the ability to service that debt is critical.”
O’Connor is likely to tell the committee that record low interest rates from policies of quantitative easing in recent years made servicing debt easier and cheaper. However, that era is now over, he is expected to say.
He will also say that, in 2024, it cost €3.2 billion to service the national debt – about 60 per cent lower than peak debt servicing costs of €8 billion in 2013.
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“We took advantage of the low interest rate era by locking in low borrowing costs for long terms. We built a debt profile that has one of the longest average maturities in Europe,” he is expected to say. “In addition, we pre-funded, borrowing money early at low rates instead of waiting to borrow at higher rates. But that era is over.”
The NTMA chief is expected to say “the benefits of borrowing at low fixed rates will recede, as these lower-cost debts gradually mature and are replaced with more expensive debt”.
“We also have to be prepared for rates potentially rising further and the additional costs that would come with that.”
The intervention comes after AIB warned in its latest economic outlook that inflation could rise to 7 per cent this year if the Strait of Hormuz remains blockaded for an extended period.
O’Connor will also tell the committee that the NTMA has now recovered more of the €5 million stolen from the agency last year.
He will say the theft arose after the NTMA received a fraudulent payment request from a third party that was designed and timed to pass as a legitimate request from an Ireland Strategic Investment Fund investee.
“We have previously disclosed the recovery of an initial €1.52 million of the €5 million stolen in the incident. I can disclose today that we have since recovered more money, bringing the total net recovery to €2.5 million. We are continuing our recovery efforts,” O’Connor is expected to tell the committee.
He is also likely to say that an independent forensic investigation to establish the facts in relation to the theft and to examine relevant internal controls, which was carried out by consultants Deloitte, is now complete.