The economic boom will allow the State to cut the national debt by £1.5 billion per annum for the next three years, reducing it to £26.5 billion, according to new estimates.
The debt is now running at about £31 billion, or £8,378 for every man, woman and child in the State. But by the end of 2002 this will have fallen to £7,160, the National Treasury Management Agency said yesterday.
However, the positive economic picture was clouded by a new inflation forecast from the Minister for Finance as the social partners gathered at a plenary session of the Programme for Prosperity and Fairness.
The Minister almost doubled his forecast, predicting that inflation could be as high as 5.25 per cent on average this year. This is in sharp contrast to his Budget estimate of 3 per cent.
According to the NTMA, under the commonly used measure of State debt as a percentage of Gross Domestic Product, levels are now running at 50 per cent and will fall to 42 per cent at the end of the year.
By the end of 2002, the NTMA says, debt will be running at only 31 per cent of GDP, the lowest in the EU with the exception of Luxembourg.
Mr McCreevy emphasised yesterday that the actual amount paid off the national debt would depend on the size of the Exchequer surplus over the coming years. "It depends on how much is spent, on the size of tax reductions and on economic growth", he said following publication of the NTMA's annual report.
Mr Paul O'Sullivan, a director of the NTMA, pointed out that the debt repayment could be even greater if the economy proved more buoyant than assumed at the last Budget. At that time Mr McCreevy estimated that GDP would grow by 6.3 per cent this year, slowing to 5.7 per cent in 2001 and to 5.0 per cent in 2002. Most forecasters believe this will be surpassed.
According to the chief executive of the NTMA, Dr Michael Somers, falling interest rates meant that national debt repayments cost £2.5 billion less at the end of 1999 than at the end of 1998. The figure will increase this year, as interest rates are on the way up.
It has been confirmed that, under legislation to be passed later this year, the NTMA will assume responsibility for new State funds for future public service and social welfare pensions as well as for a State claims agency and central treasury services.
Mr McCreevy said yesterday that the NTMA would also be given responsibility for holding money at present deposited in dormant accounts when enabling legislation is passed later this year to remove these funds from financial institutions.
The NTMA will also be offering central treasury services to local authorities, health boards and other bodies. The aim is to ensure that one authority is not depositing large amounts with a bank at a low rate of interest so that another authority can borrow from the same bank at a far higher rate.