Financial Services

Mario Draghi’s number one fan: the NTMA

Cantillon: Agency chief explains how Ireland has benefitted from ECB low rate policies

European Central Bank president Mario Draghi: his pledge to do “whatever it takes” to save the euro in 2012 has been a boon for Ireland and the NTMA. Photograph: Viginia Mayo/EPA

Tue Jul 2 2019 - 05:30

National Treasury Management Agency (NTMA) boss Conor O'Kelly joked yesterday that he should have a photo of European Central Bank (ECB) president Mario Draghi on his desk, so helpful has the Italian been to the agency and its management of Ireland's monster €200 billion debt.

Draghi's pledge to do "whatever it takes" to save the euro in 2012, backed up by a massive, multi-trillion euro bond-buying programme and a policy of keeping interest rates at a record low of zero per cent for several years, has been a boon for Ireland and the NTMA.

It has reduced the annual cost of servicing the national debt from €7.5 billion in 2014 to €5 billion this year. Perhaps more significantly from the agency’s perspective, it has facilitated the elimination of several so-called debt refinancing “chimneys” in 2018, 2019 and 2020.

Most of the €60 billion in debt that had fallen due for repayment in these years has been successfully refinanced by the NTMA through a concentrated programme of early buybacks, the switching of near-term bonds to longer maturities and the early repayment of outstanding IMF debt. All this has been made easier in the current climate of ultra-low interest rates.

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“Taking a medium-term view, once the last of the chimneys is eliminated in 2020 the annual redemption profile will be as smooth as any time in our history,” O’Kelly said.

That’s not to say we’re out of the debt woods by any means, just that the early difficult phase has been achieved with the minimum of fuss.

On a per capita basis, Ireland still has the third-highest debt in the world, equating to €42,000 for every man, woman and child in the State. As a ratio of Government income, a metric that international investors and bond markets keep a close eye on, it stands at 252 per cent.

“It is worth pointing out that this year’s interest bill will still be three times the annual average over the period from 2003 to 2008 despite the cost of borrowing being four times lower,” O’Kelly noted.

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