National debt increases €93.4bn

IRELAND’s national debt stood at €119.1 billion at the end of 2011 — up from €93.4bn a year earlier.

Figures published yesterday by the NTMA — the body in charge of managing the debt — show that debt service costs, or the cost to the taxpayer of interest and other charges on Government debt, amounted to €5.4bn for 2011. Debt service costs totalled €4.6bn in 2010, €2bn higher than in 2009.

General government debt stood at an estimated 107% of GDP and is set to peak at 119% in 2013.

The NTMA said so-called burden-sharing with subordinated bondholders has delivered €15.5bn for the Exchequer since 2009.

Chief executive John Corrigan said: “The NTMA remained at the forefront of the state’s response to the financial crisis during 2011 through its ongoing investor relations programme, provision of advice to the Minister for Finance on borrowing and debt-related issues, its work on burden-sharing with subordinated bank bondholders, and the work carried out by the National Pensions Reserve Fund [NPRF].”

The NPRF saw its discretionary portfolio earn a 1.6% preliminary return — about €250 million — compared to a 3.5% fall for average Irish-managed pension funds.

“The positive performance of the discretionary portfolio was largely due to the fund, in mid-year, adopting a significant tactical ‘underweight’ position in equities and purchasing two-year equity index ‘put’ options, which have shielded much of the fund’s quoted equities holdings from adverse price movements,” the agency explained.

In July, the NPRF reduced its exposure to equity markets by 10%, or €500m amid mounting concerns about the global debt crisis.

The purchase of the two-year ‘put’ options — financial instruments which protect against negative price movements in the markets — protects €1.3bn of the fund’s quoted equities.

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