Central Bank foreign currency reserves should be raided to pay for the National Pensions Reserve Fund (NPRF), the Dublin Economic Workshop in Kenmare was told at the weekend.
Mr Oliver Mangan of AIB's Economic Research Unit, said that the Government should seek to meet its annual obligation to transfer 1 per cent of GNP to the fund by exploiting State resources.
This strategy, which he said would follow naturally from the Government's use of Eircom privatisation receipts to establish the fund in the first place, would eliminate any need for borrowing to cover contributions in the near term.
As the public finances move into deficit, most commentators agree on the likelihood that the State will have to borrow to reach its desired contribution level in this and coming years.
"This can hardly be regarded as saving for retirement given that an offsetting debt is created," said Mr Mangan.
"Rather than borrow the money, the Government should seek to transfer State resources equivalent to 1 per cent of GNP to the pension fund each year."
Mr Mangan said that the Central Bank currently held about €6 billion in foreign currency reserves, a sum which he estimated would equate to almost six years' worth of NPRF contributions.
He acknowledged that Central Bank liabilities - about €3.5 billion in 2001 - would have to be eliminated before the amount of "surplus" capital in this sense could be accurately calculated, but said that there was no justification for it to remain within the Bank.
"There is no need for the Irish Central Bank to now carry foreign currency reserves on its balance sheet," said Mr Mangan, pointing out that foreign-currency risk for the euro zone was now borne by the European Central Bank.
Fellow speaker Mr Joe Durkan of UCD, was also heavily critical of policy with regard to the National Pensions Reserve Fund, arguing that a policy of borrowing to fund contributions was foolhardy, "unless the use of the funds gives a return greater than the cost of borrowing by Government".
"This seems implausible in the current situation," said Mr Durkan, noting that much of the fund had thus far been invested in equities which had delivered a substantial loss.
Mr Mangan later called for a radical overhaul of the Special Savings Incentive Scheme, arguing that the Government should cut its contributions to the scheme's accounts by at least half in order to stem the annual drain of about €500 million from the public finances.
Investors who did not wish to remain in the scheme under such conditions should be allowed to exit without losing bonus payments that had accrued to date, Mr Mangan said.
He criticised the Department of Finance's initial costings of the scheme, claiming that a "back of the envelope" calculation drawn up by banker colleagues after the scheme was first announced had put annual costs in the region of €400 million. This compares to the Department's original annual costing of €127 million.
