Funding the Exchequer Balance

Yesterday, the NTMA published its Q3 report on the Funding of the Exchequer Balance.  It includes the following table.

At the end of September there was €23.7 billion in the Exchequer Account.   The Exchequer has run a deficit of more than €11 billion in the first nine months of the year but, as can be seen above, has received surplus funding of around €10 billion over and above that required to finance the €11 billion cash deficit.

The source of the €21 billion of funding received by the Exchequer this year has been:

• EU/IMF Loans: €18.7 billion
• Long term government bonds: –€0.5 billion
• Commerical Paper: €2.3 billion
• National Savings Schemes: €1.3 billion
• Other Funds: –€0.6 billion

The funding from long-term government bonds is negative because there was a €5.5 billion bond that matured in March of this year and this offsets the €5.0 billion of new funding that was received from the NTMA’s ventures back into the long-term bond markets in July and August. [There was also €3.4 billion bond issued in April to meet this year’s Promissory Note payment but as that negated a cash payment it did not increase funding.]

At €23.7 billion (15% of GDP) it is clear that the Exchequer is sitting on a massive cash buffer.  There are reasons why such a buffer has emerged and is required.  The NTMA made the strategic decision to re-engage with bond markets at a time when bond yields allowed.  We didn’t need the money at the time but the signal of the moves was important. 

There are bond redemptions of €5.6 billion (April 2013) and €7.6 billion (January 2014) and a 2014 Exchequer Deficit to be funded.  Still, one would wonder whether we need a cash pile of €23.7 billion now and it should also be remembered that this offsetting asset exists when gross general government debt figures are quoted.