After five years as chief executive of the National Treasury Management Agency, John Corrigan presided over the launch of its annual report for the final time on Monday. He will take his leave of the agency in December and appears to have timed his departure well.
After three years of being frozen out of international capital markets, it is once again "business as usual" for the State selling its sovereign bonds, said Minister for Finance Michael Noonan at the launch.
Ironically, Irish bond yields are at record lows – the 10-year rate is about 2.3 per cent – just seven months after our exit from the EU-IMF financial assistance programme. It’s almost as if the financial crisis never happened.
Over the past year or so, the NTMA has carefully plotted the State’s successful return to the markets and persuaded the ratings agencies we merited upgrades. This cleared the way for our smooth exit from the bailout programme in December when six months earlier all the talk had been around a precautionary line of credit.
We even have the luxury of being able to run down our cash balances by €3 billion or so over the next 18 months to the point where we only need to have nine to 12 months of cash in reserve for a rainy day instead of 12 to 15 previously.
Noonan described Corrigan as “one of the most dedicated public servants” in the State. “He’s done a great job for all of us and his name will be in the history books when the story [of the recovery] is told.”
This is no doubt true, but we shouldn’t lose the run of ourselves just yet. Amid the Minister’s praise for a job well done is the fact that the State’s national debt last year rose by 26 per cent to €173.9 billion, while our debt servicing costs rose by one-quarter to €8.1 billion. Roughly a third of the increase in debt related to drawdowns from the troika bailout programme.
State savings products added a couple of billion euro to the mix but the bulk of additional debt was related to the Irish Bank Resolution Corporation promissory note, with maturities from 25 to 40 years.
The national debt is a net figure incurred by the exchequer and factors in €23.6 billion worth of cash and other financial assets on the State’s books. The general Government debt relates to the total gross consolidated debt of the State and is the measure used by the EU. At the end of last year this was €202.9 billion.
It is projected to be 121.4 per cent of GDP in 2014, reducing to 107.2 per cent in 2018 as we reduce our cash balances and the economy grows. At the end of last year, only Greece, Italy and Portugal in the EU had worse debt-to-GDP ratios.
While the Central Bank this week forecast GDP growth of 2.5 per cent for this year and 3.3 per cent for 2015, the high rate of unemployment, hefty mortgage arrears and SME debts are all a potential drag on a sustained economic recovery.
When you consider that the NTMA's family unit includes the new strategic investment fund and the Strategic Banking Corporation of Ireland (both designed to help fund SMEs), not to mention the National Asset Management Agency, which is set to assume a key strategic role in commercial and residential development in the greater Dublin area over the next few years, it is vital that we choose the right person to succeed Corrigan.
The NTMA has only had two chief executives: Corrigan,who has been with the agency since 1991; and Michael Somers, who came from the Department of Finance at its inception before retiring in 2009.
Search for successor
Noonan said on Monday that an open competition had been initiated and the best candidate, be they internal or external, would be appointed. Airline executive Willie Walsh, as chairman-elect of the NTMA's soon-to-be constituted board of directors, will be involved in the recruitment and will make a recommendation to the Minister in the coming months.
An outstanding external candidate might emerge, yet it seems more likely that an internal candidate, from the NTMA or Department of Finance, will be chosen.
There is one obvious internal candidate: Nama chief executive Brendan McDonagh, who is in effect on secondment from the NTMA. Nama has many critics but it is ahead of target with its debtor workouts and looks set to make a profit for taxpayers. McDonagh would be a safe pair of hands. Yet moving him could risk the momentum Nama has built up over the past four years.
Over to you, Minister.
