DUBLIN, May 10 (Reuters) - Ireland could amass a 142
billion euro ($156 billion) sovereign wealth fund by 2035 and
cover much of its future age-related costs if it invests all its
forecast windfall corporation tax receipts, the finance ministry
estimated on Wednesday.
Ireland was one of the few euro zone countries to record a
budget surplus last year - at 3% of gross national income - and
the government has pledged to set up a new actively managed fund
to put future surpluses aside to meet long-term costs such as
pensions, healthcare, de-carbonisation and digitalisation.
The healthy public finances are being driven entirely by the
surging corporate taxes paid by a small number of multinationals
and the finance ministry forecast last month that the budget
surplus would reach to 6.3% of national income by 2026.
Finance Minister Michael McGrath said ministers agreed that
they would save a substantial amount of the forecast surplus,
while also being open to reducing Ireland's large national debt
as bonds mature and considering additional targeted capital
investment where capacity was not a constraint.
"I see this as a once in a generation opportunity to make
our nation's finances safer," McGrath told reporters on
Wednesday.
McGrath's department said the fund could reach 142 billion
euro if 12 billion euros - its windfall corporate tax estimate
for 2023 - was invested each year to 2030, generated a real rate
of return of 5% and those returns were reinvested until 2035.
That would cover 82% of the projected rise in age-related
costs by that year or 41% at a lower return of 3%. If ministers
opted to invest just 4 billion euros a year, the fund would
cover just 12-32% of the costs, which are projected to rise
sharply due to an ageing population.
The finance ministry also called for strict drawdown rules.
McGrath said accessing the fund "should be possible but only in
defined circumstances" and that rules around that and the levels
of investment would be decided in the coming weeks.
"It is not a slush fund that can be dipped into for a whole
variety of reasons," he said.
($1 = 0.9084 euros)
(Reporting by Padraic Halpin; Editing by Alex Richardson)
Messaging: padraic.halpin.thomsonreuters.com@reuters.net))
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