NAMA won't be part of national debt
Tuesday, 20 October 2009 17:04The cost of funding the National Asset Management Agency will not be added to the national debt.
The European Commission's statistical service Eurostat has accepted the Government's method of treating NAMA as an off balance sheet Special Purpose Vehicle (SPV), which will not be included in the figures used to calculate the national debt.
The €54 billion required to fund NAMA represents around 30% of gross domestic product (GDP), or economic output. On top of the very rapid increase in the Government debt as a result of borrowing to fund the budget deficit, the inclusion of the NAMA sum in the national debt calculation would have pushed the country's debt/GDP ration well over 100% next year.
Under the EU stability and growth pact, countries are supposed to have a debt/GDP ratio of 60% or less. The Irish Government has been given five years - instead of the normal two - to get its debt ratio down to the target figures. Not having the NAMA money included makes that task easier.
The most recent Department of Finance estimate for Ireland's debt ratio is 59% for the end of this year, rising to 73% by the end of next year.
Eurostat's decision is subject to the setting up of certain entities which will be the legal holders of the NAMA assets, while NAMA will retain effective control and a veto on decision-making. These special purpose vehicles will include private equity.
The Minister for Finance Brian Lenihan welcomed the preliminary decision, but the department also pointed out that it did not change the fact that NAMA would increase the State's potential liabilities.
