BREAKING NEWS: The Department of Finance has confirmed tonight that Ireland’s debt will be 2% or €3.6 billion lower than previously thought….thanks to an accounting errors!
Unions are already calling on the Government to halt massive cuts planned in next month’s Budget which will hit thousands of families across County Donegal.
A spokesman for the Department of Finance said that, as a result of a “re-classification”, the country’s debt to GDP ratio would be lower. It is understood the development has occurred as result of double-counting.
It’s all very complicated….but here’s our attempt to explain it!
A statement from the Finance Department said that the NTMA has recently made both the Department and the Central Statistics Office aware of the fact that there was a change in their relationship with the HFA that has an impact on the accounts of the two entities.
It said that previously, the National Treasury Managment Agency had acted as agent for the Housing Finance Agency (HFA). Since late 2010 the NTMA has loaned directly to the HFA. These loans appear as assets in the NTMA accounts and liabilities in the HFA accounts.
”The liabilities of the HFA are included in general government debt; the corresponding assets of the NTMA have been included in the ‘liquid assets’ of the NTMA, which are also part general government debt – effectively a double count,” the statement added.
”Removing the impact of this double count reduces the estimate of 2010 general government debt by €3.6 billion or 2.3% of GDP,” the Finance statement concludes.
It’s kind of like the Government winning the EuroMillions (about 100 times over).
Below is the CSO statement in full:
Correction to Ireland’s end-2010 General Government Debt
The end-2010 General Government gross debt (GGDebt) figure reported to Eurostat last month by the Department of Finance and the Central Statistics Office was overstated by some €3.6bn. This means that the correct figure for Ireland’s GGDebt at end-2010 was €144.4 billion (92.6% of GDP) rather than the published €148.0 billion (94.9% of GDP).
The GGDebt is defined by EU regulations as the total gross debt owed by all government bodies to third parties outside of government. If one government body owes another money, this does not count towards the GGDebt.
In 2010, one government body, the Housing Finance Agency (HFA), for the first time borrowed €3.6 billion from another government body, the National Treasury Management Agency (NTMA). In previous years, HFA borrowings had been sourced on the open market.
When compiling the end-2010 GGDebt figures, this €3.6 billion was mistakenly treated as external borrowings and was wrongly added to the GGDebt.
On the General Government balance sheet, end-2010 financial assets were also overstated by the €3.6 billion, as the loan from the NTMA to the HFA was incorrectly recorded as an open market bank deposit.
The error was recently drawn to the CSO’s attention by the NTMA. The CSO has informed Eurostat of the error, and the figures shown in respect of Ireland’s gross debt and the associated debt/GDP ratio will be corrected in future releases relating to Government debt.
The General Government Deficit (GGDeficit) figure for 2010 reported for Ireland is not affected by the revision, and neither is Ireland’s net debt position (GGDebt less liquid assets).
Overall, the State is no better or worse off as a result of the correction.Tags: