Borrowing agency aims to ease State cash crisis

THE Government will today move to ease its cash crisis by setting up a borrowing agency to raise anything up to €10 billion from the private sector over the next five years.

The move comes as it emerged that the Cabinet will hold a special pre-Budget meeting next Saturday week to review the current state of the economy.

At the same time, the Opposition is raising pressure on the Government and Finance Minister Charlie McCreevy, in particular, over their handling of the economy.

Finance Department officials will this afternoon publicly launch the National Development Finance Agency (NDFA), aimed at providing vital private sector funds for road-building and other public works projects. The Exchequer

financial situation is worsening by the day and 1bn was wiped from the national coffers last month alone. All ministers are fighting to reduce cutbacks affecting their departments, and projects under the National Development Plan face long delays.

The Exchequer is set to end this year with a deficit of at least1bn. Hopes persist that the new agency's work will meet with EU approval as using a form of borrowing within single currency membership rules.

But considerable doubt hangs over that issue, as the Luxembourg-based EU statistics service, Eurostat, has already seriously queried a similar strategy adopted by the Portuguese Government. The crux of the matter is the extent to which borrowing is underwritten by the Government and whether the funds are spent on projects which offer a direct income return such as road and bridge tolls.

Officials last night said the NDFA would be staffed by experts who know about company finance, business risk and with the ability to deliver big building projects. It will advise the Government on how to borrow at the lowest rates and manage debts effectively thereafter, and will function under the aegis of the National Treasury Management Authority, set up in the 1980s to manage the then-enormous national debt. One official last night described the new agency as a potential one-stop shop for government agencies seeking funds. The idea was first floated by Mr McCreevy during the general election campaign last April and later adopted in the Fianna Fáil-Progressive Democrats Programme for Government.

The Government approved the idea in principle on July 26 and today sees publication of the detailed plans, due to be put through the Dáil and Seanad by the end of next month. It may, however, be late next year before it is fully operational and too late for any of the money to ease the financial situation in the coming 12 months. The Cabinet meeting on Saturday, November 16, will follow publication of the 2003 Government spending plans or Estimates and in preparation for the Budget.