The head of Ireland’s debt management agency has issued a stark warning about the country’s indebtedness, saying the bank stakes should be sold down sooner rather than later. National Treasury Management Agency (NTMA). Chief Executive Conor O’Kelly said that we are reaching the peak of the investment cycle and the risk of a material fall in the shares’ value was greater at this point.
O’Kelly said “We have reached a late stage in the current investment and interest rate cycle that has provided such a supportive backdrop for the Irish economy and for the NTMA as the State’s debt manager. If the cycle is a 12-hour clock we are around 11 o’clock right now. The NTMA’s market activity has reduced borrowing costs and extended the maturity profile of Ireland’s debt. This has resulted in Ireland now has one of the longest weighted average maturity debt profile in the Eurozone (11.2 years at end 2017, up from 7 years at end 2012). The NTMA has also reduced the risk profile of Ireland’s debt by pre-funding in advance of significant debt redemptions and increasing its cash reserves.”
“However, a number of commentators have talked about darker clouds coming on the horizon. As a signpost, the Federal Reserve is deep into its rate increasing cycle which often heralds global economic downturns. That may bring Ireland’s high stock of debt – which at €213bn is more than four times its 2007 level – into sharp focus. Whilst our debt ratios are improving, our total nominal debt is still rising as we continue to borrow to pay interest. This will limit our ability to absorb future shocks and therefore opportunities to pay down debt become even more important.”