Source: Irish Government Data
The national debt of Ireland refers to all of the debt owed by the national government under standard financial instruments. Local government debt, unpaid invoices, pension obligations, and lease agreements are not counted as part of the debt.
In the case of Ireland, there is one other obligation, which would increase the record figure of Ireland’s national debt if it was recognized by standard accounting conventions in the governments account. That is the guarantees that the Irish government issued to underwrite all deposits made to Irish banks.
The National Treasury Management Agency (NTMA) was founded by the Irish government to raise funds for the public purse through borrowing. The agency’s remit has expanded since it was create to that of managing public assets and liabilities, which extends its responsibilities beyond the requirement to issue bonds on behalf of the government.
Economists and lenders are more interested in the debt to GDP ratio of a country than the actual absolute amount. For example, $1 billion of debt would be much easier for a country such as the United States to repay than it would for a country with a smaller economy, such as Tunisia.
The debt to GDP ratio admitted to by the NTMA stood at 68% at the end of 2017. Economists argue that this figure is misleading and the country’s true debt to GDP ratio is probably more like 106%. No one disputes the debt amount. However, the traditional method calculating GDP breaks down in Ireland. This is because the country attracted a lot of foreign multinational companies to make their EU base in Ireland by offering tax exemptions. As a result of this, many US companies run their entire EU revenue through their Irish offices even when the work that earned that money was actually performed in other countries. An example of this distortion of GDP figures occured in 2016, when the Central Statistics Office reported Ireland’s GDP had grown by 26.3% in 2015.
These figures were not believed and it was only in 2018 that the cause for the leap in GDP was revealed. Apple adjusted its accounting procedures to run all of its European sales through its Irish office, thus taking advantage of the tax advantages that it gets in that country. So, one company accounted for a leap of GDP of more than 25% that generated no income for the government. Thus, the debt to GDP ratio does not assist buyers of Irish government bonds in assessing the borrower’s ability to repay the debt.
Like any government, the Irish Treasury needs to raise funds to finance long-term projects and also needs to bridge the time difference between spending and receipts. So the government issues:
The dividing line between long-term and short term debt is 365 days (one year). So all all of the short-term instruments that the Irish government issues has a maximum life of 364 days.
The Irish government issues three types of bonds:
The NTMA has only ever made one issue of floating rate bonds, which was on the 8 February 2013. This was an accounting measure to repay a promissory note held by the Central Bank of Ireland. The central bank has the right to exchange these bonds for fixed rate bonds, even those that it no longer holds — in which case, the current owners will receive fixed rate bonds in exchange for their holdings.
The bonds were created in batches of different maturity dates. Of these, bonds with a maturity date of 2038, 2041, 2043, 2045, and 2047 have already been swapped. Floating rate bonds with maturity dates of 2049, 2051, and 2053 are still in circulation.
The NTMA issues three types of short-term loans:
The largest holders of Irish government debt are overseas investors. Please see the table below for a complete list of investor categories.
Debt Holder Type Percentage Share Market Value (€mn) Q1 2017
Credit institutions and central bank 41.07% 51,712
Non-bank financial 2.05% 2,577
General government 0.4% 500
Household and non-financial institutions 0.23% 284
Overseas buyers 56.25% 70,814
Total debt 100% 125,887
What facts should you know about Ireland’s national debt?