Cash Balances > €30 billion

The Q1 2013 Funding of the Exchequer Balance note published by the NTMA on Friday contains the following:

31/03/13 Balances of €33,049m (31/12/12: €23,997m) were held in Departmental Funds & Other Accounts, including the Exchequer A/C.

These balances are now equal to 20% of GDP.  Of the total, €3.9 billion is accounted for by notes from the Housing Finance Agency which still leaves €29 billion in the Exchequer and Other Accounts (though presumably the HFA notes could be sold).

The Exchequer Borrowing Requirement (EBR) for the remainder of 2013 could be around €10 billion (depending on the outcome of the IBRC liquidation) and there is bond of just over €4.5 billion maturing in a little over a week’s time.  The full-year EBR for 2014 is projected to be around €8 billion with a €7.5 billion bond maturing in the middle of January.  These total €30 billion and could be met from existing resources but it is expected that additional funding will be sought.

There is still around €10 billion of funds to be drawn from the €67.5 billion total available under the EU/IMF programme as €57.3 billion had been forwarded to Ireland by the end of March. 

The NTMA has announced an intention to raise €10 billion through the issue of new government bonds in 2013.  Three-quarters of this has already been achieved with €2.5 billion raised from a 2017 bond in January and €5 billion from a 2023 bond in March.

Since 2008 contributions to the national savings schemes have increased significantly.  At the end of 2007, these schemes had attracted a total of €4.5 billion.  In 2012, around €2.2 billion was placed with the schemes and the total had increased to €14.5 billion by the end of the year.  These contributions have continued in 2013 with the NTMA Funding note showing that a further €0.6 billion was added in the first quarter.

The Treasury Bill programme was resumed last July and there is now €1.5 billion in issue across three €500 million tranches (maturing April 22, May 20 & June 24) with monthly auctions likely to continue.

Just over €1 billion was paid into the Exchequer Account in January as a result of the sale of BOI contingent capital notes.  A further €1.3 billion will be received when the sale of Irish Life is completed.

This means that cash balances could be maintained at around €30 billion in December 2013 if the EU/IMF draw downs, bond/bill issues, and savings contributions set out above are made which would roughly cover twice over the €15.5 billion gross financing need for 2014.  Whatever significant difficulties the economy faces, the government running out of cash in the near term is not one of them.

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36 thoughts on “Cash Balances > €30 billion”

  1. This has been covered before. Might be prudent but it bears a huge cost.
    Anyone got the numbers?

  2. Good decision by Govt to keep up cash balances. They should aim not to reduce below €30 billion figure. This ‘running away’ money will be needed.
    I was critical of the sale of BOI CC bond on the basis that is sold cheap. Not any more, especially after seeing the recent results of the banks.
    The euro will, hopefully, start to disintegrate later this year. We need to take the opportuniy for an early exit and the more cash in the kitty the better.
    Devaluation bidding against the core euro or DM estimate of about 35%. That should blow the lid off the ‘internal imbalances’ pressure cooker. Not before time.

  3. Where does the Govt. keep our €33 billion? On a/c with the Irish Central Bank or somewhere safe like offshore US dollars?

  4. As per JR, given the crises that are likely to ensue in the next year or so, it is good that we have some much cash on hand.

    However, given that some of the biggest barriers to growth are personal indebtedness and bust banks, would it be more worthwhile to use this money to write down mortgages, recap the banks (again) and then sell them off.

    That should get credit flowing and stimulate the domestic economy at the same time. Of course we would have to stop obsessing about moral hazard amongst the little people for 5 minutes….

  5. @bazza

    The CBI was on the ‘moral hazard’ trail for the 2008 to 2012 period but methinks there has been a slight change of heart recently. Or to be more precise they now realise that the policy of hope and recovery in house prices and the economy generally is wishful thinking and something has had to give.

    Why oh why it has taken the best part of 5 years to realise that moral hazard was never the real issue in the personal debt disaster that we find ourselves is unforgiveable.

    The powers that be bought the banks line in 2008 and have been buying it since but I do believe the banks are now begining, very slowly, to realise that they were involved in an enormous screw up, mis selling scandal, call it as you like – but quite why it has taken so long for both Regulators and the banks themseleves to realise the scale of the personal debt disaster is extremely vexing. So I agree you, with so much cash at our disposal and the key to the economic recovery door staring us in the face i.e. debt write off on a massive scale, what are we waiting for?

  6. @ Bazza

    “However, given that some of the biggest barriers to growth are personal indebtedness and bust banks, would it be more worthwhile to use this money to write down mortgages, recap the banks (again) and then sell them off.”

    I think the original point of the post was about liquidity. You seem to be referring to debt.

  7. yes guys lets give this reserve to those that are in negative equity and dont want to pay

    Besides were the banks not given the captila to cover this?

    This capital reserve may substitute for deposit snatching when the second bailout comes

  8. lost here,is this a frequently used metric and how does it compare to other similar countries ?

  9. @ bazza

    I did the calculations awhile ago based on figures from the Department of the Environment. All mortgages issued since then could be written down to Q1 2002 levels (using a national price index) for €20.7bn, this even includes BTLs.

    This would as you say stimulate the domestic economy. That and the monetary reforms put forward by Paul Ferguson would give us a sustainable economy.

  10. A frequently used metric in NY,is F**K Y*U money,as in always have 6 months FU money in bank of mattress.
    You can get fired, quit job,divorce,run away so long as you have 6 months FU money.
    This is the first time I have ever come across two years of FU money,but again first time ever to read about this metric for sovereigns,perhaps as a % of GDP,DS ratio but as raw cash metric….hmmm.
    So is it better if it increases or will the mkts panic if it decreases,I’m sure there is a point above just lost me,but this is NOT my area of expertise at all.

  11. Maybe a dumb question but in addition to oodles of cash (?), does Ireland actually have an gold (and if so, where is it held)?

  12. What is the carrying cost of all this cash? a country with banks that are likely to need another bailout and a country that is unlikely to get any change back from the ESM has all this cash sloshing around its coffers. Undoubtedly it is going to be required. However, I would say the primary motivation is, to be able to keep the salaries and pensions of those doing the borrowing paid in the event of a collapsing Euro.

  13. @ PR

    “Maybe a dumb question but in addition to oodles of cash (?), does Ireland actually have an gold (and if so, where is it held)?”

    Very little. In Central Bank of Ireland “reserves”. Think its only a few hundred million.

  14. @ John Gallagher

    we have, by some distance, the biggest cashpile of any country in the EZ in % of GDP terms. I think we have the third or fourth highest in absolute cash terms (ie more than Spain). Most countries would have something similar to your NYFU money idea, ie 3-6mths cash. The NTMA has always been a somewhat conservative organisation from that point of view, think they had 6-9mths of cash even when the Troika rolled into town in 2010.

  15. @BEB,thanks would this be official govt. policy,as is in there a target or “number” that are looking to hit.Quite the cash cushion more like mountain to be sitting on,but they may be a fearful of another “black swan” event…

  16. @ JG

    no formal “policy” so to speak, but they have said they want to have 12-15mths funding in place as they exit the Troika program. Assume they maintain this until things look to have permanently (!) calmed down, and then reduce that balance down gradually to something more like 6-9mths. It will ultimately depend on how markets behave going forward, though they should also have backstops like OMT, precautionary credit lines, ESM etc to have on hand as well.

  17. @BEB,hoarding cash as opposed to investing in the economy would appear to be official govt. policy,another victory for capital over labour !

  18. The govt. or NTMA must have a good reason for having this much cash on hand,its almost like they have PTSD…..pick a ‘target’ based on other similar situations,publish it,hit it and go redeploy the surplus capital productively.It appears an excessieve rainy day fund…look out the window its pi**ing down..

  19. @Bond Eoin. Bond

    Thanks for the answer.

    I noticed a report today saying that Cyprus was selling 400m (?) of their gold holdings (or are they still called ‘reserves’?).

    I would love to see a graph/picture of how much gold various countries actually have (if you should happen to know of one)/who are the buyers and who are the sellers of it. I would imagine places like China and India buy a fair bit regularly.

    Is it true that (I really don’t know much about gold – perhaps I should?) a number of European countries physically locate it in the USA? Is that for some sort of security reasons?

  20. @Pr Guy…could have bought yourself some sideline tks for the big game with your ‘winnings’ all best with that,cant help you there…
    Tons of coverage about corporations hoarding profits and the drain it is…so much unproductive capital sidelined…i disagree strongly with this level of cash been held at a negative carry……are they that nervous ?

  21. @John Gallaher

    “are they that nervous ?”

    Have you ever met a Chief Risk Officer?

    Anyway, I’m going for a change of codes tonight and think I will amble out and have a glass of wine and watch Chelsea do whatever it is they do. I must remember to ‘check in online’ later.

  22. @PR Guy i had seen/heard about the gold selling stuff all day but here it is and the leaked doc.’s.
    “As our friends and rivals at Reuters first reported, the most unexpected thing in the documents is the revelation that Nicosia will help reduce its debt burden by selling off “the excess amount” of gold reserves held by the Cypriot central bank, which is expected to raise €400m.”
    http://blogs.ft.com/brusselsblog/2013/04/cyprus-oddities-in-leaked-bailout-documents/?
    the doc itself
    http://blogs.r.ftdata.co.uk/brusselsblog/files/2013/04/DSA-9-April2013.pdf

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