June 15, 2020 / 2:19 PM / 19 days ago

Irish debt agency chief warns on longer term borrowing

DUBLIN (Reuters) - The head of Ireland’s debt agency said he is not worried about the state’s ability to borrow over the next four years but that it needs to prepare for the decade after that due to an increase in already high debt levels.

Ireland attracted record high demand last week at a sale of 10-year bonds, helping it close in on an annual funding target that was revised significantly higher just two months ago to shore up government finances after the coronavirus pandemic.

Ireland expects the disruption to turn last year’s budget surplus into a deficit of up to 10% of gross domestic product this year and the government intends to borrow heavily to revive what was Europe’s fastest growing economy before the pandemic.

“From a borrowing perspective the NTMA (National Treasury Management Agency) is not worried about the next four years. It is the decade after that we need to keep an eye on and begin to plan for,” Conor O’Kelly told a news conference.

“Ireland should prepare for dealing with a higher debt burden and the risks that this entails. It’s possible the tailwinds that exist today will be replaced with headwinds in the future.”

Crediting European Central Bank policy, O’Kelly said it is very likely sovereigns will be able to issue at favourable rates “for some time to come”. The NTMA was not planning to go beyond its 20-24 billion euro borrowing target for 2020, he added.

The NTMA oversees Ireland’s investment-focused sovereign wealth fund which the state has mandated to invest 2 billion euros directly into larger firms in need of funding due to the shutdown of the economy that is being slowly unwound.

Some 30 firms, which the NTMA said included many “critical employers” in hospitality, tourism, retail and transport have enquired about funding. O’Kelly said it was encouraging that not many had been so hard hit that they needed funding urgently.

Reporting by Padraic Halpin; Editing by Alison Williams, Kirsten Donovan

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