Ireland’s borrowing position remains strong as cost of borrowing to increase

In its mid-year update and 2021 annual report, the National Treasury Management Agency (NTMA) said that the average rate of the country's debt would remain near the recent low of 1.5% for 2022.

Thu, 07 Jul, 2022 - 09:43

Emma Taggart

The National Treasury Management Agency (NTMA) has said that Ireland's borrowing position remains strong despite the rising costs that are associated with servicing it.

In its mid-year update and 2021 annual report, the National Treasury Management Agency (NTMA) said that the average rate of the country's debt would remain near the recent low of 1.5% for 2022.

Almost 60% of the funding for 2022 was carried out prior to the recent increase in interest rates. As a result, the interest bill for 2022 is set to remain at a similar level to 2021

NTMA said that due to prefunding it now has over €30bn in cash available at the half-year mark. It stated that this prefunding will "reduce the requirement for borrowing at higher rates in the coming years".

Ireland's debt has a long average maturity, at 10.7 years on average.

NTMA stated that this long maturity period will reduce the risk of refinancing as it expects central banks to significantly increase interest rates in the future.

On average, only 4% to 7% of Ireland’s debt stock falls due for refinancing each year over the next decade.

During 2021, the average yield on bond issuance was 0.18% with a weighted average maturity of 14.4 years. This compares to the previous year when the average yield stood at 0.21% and there was a weighted average maturity of 11.5 years.

In the first half of 2021, the NTMA issued €5.75bn in benchmark bonds at a weighted average yield of 0.76% and a weighted average maturity of 13 years.

Frank O’Connor, CEO, NTMA said: "Whilst the cost of servicing Ireland’s debt will increase from 2022 onwards, Ireland’s borrowing position remains strong with a significant cushion in place to mitigate the impact of higher borrowing rates.

"This arises from our multi-year programme of prefunding and locking in the benefits of unprecedented low interest rates for the long term, giving us more than €30bn in cash and a long average maturity of 10.7 years, one of the longest in Europe," he added.

Ireland Strategic Investment Fund (ISIF)

Meanwhile, in 2021 the Ireland Strategic Investment Fund (ISIF) made an annual return of 10.7% in 2021, equating to annual investment gains of over €900m.

From its establishment until the end of 2021 the ISIF is said to have generated just under €2.7bn of value-added.

In 2021, the ISIF made 25 investments totalling €670m. Overall at the end of 2021 total ISIF commitments reached €5.6bn across 166 investments and €9.4bn of co-investment commitments since its formation.

During the first half of 2022, ISIF has approved €477m in investments.

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