how long till we run out of money

elpresdentde

with current spending the way it is how long until Ireland is unable to borrow any more money. how long until we will be unable to pay pensions and unemployment.

8kvscdpglqnyr4

And what happens when we do?

The government have guaranteed the deposits in the Irish banks, but at the rate the banks are going (both BOI and AIB are at 30 cents now!), if the banks go to the wall and the government have to cover their debts, does that really mean our deposits are safe?

Clytus

I thought I heard this morning someone comment that Ireland had pleanty of cash and that the Goverment wouldnt need to head out to the markets for some months yet.

Économiste Monétaire

We had approx 20 billion in cash at the end of 2008; we also raised 6 billion early this month.

Lenihan said on prime time that we`re grand.;)

Kine

I ran out of money last week

johnnyskeleton

elpresdentde wrote: »

with current spending the way it is how long until Ireland is unable to borrow any more money. how long until we will be unable to pay pensions and unemployment.

We've already run out of money as we have to either borrow or dip into the pension fund to finance our current account. As to when the barman will stop putting pints on the slate, he's certainly giving us a scowl at the moment, and since no other pub will let us in at this hour of the night, things could get pretty bad pretty quickly.

grizzly

So how long until we're locked our of our own homes screaming "let me in love! Pleaseeee!" with vomit drying in our hair? (to further the anology) :P

gurramok

Économiste Monétaire wrote: »

We had approx 20 billion in cash at the end of 2008; we also raised 6 billion early this month.

20 bills minus the cash injection for the banks.

The 6 bills were borrowed at a high interest rate, a rate which just so happens has risen since that 6 bills was borrowed

TheBazman

gurramok wrote: »

20 bills minus the cash injection for the banks.

The 6 bills were borrowed at a high interest rate, a rate which just so happens has risen since that 6 bills was borrowed

The 6 bill was raised at a large spread above Germany, however given government yields had dropped significantly in the past year or so the actual all in rate of this borrowing was relatively low. It is also 1/3 to 1/4 of out total LT borrowing out of the way in the first week of the year. You say the rate has risen since - that means that it was a wise move (altho in fairness luck probably plays a larger part) to do it early in the year. It should also be noted that spreads are widening out all over the world so Ireland is not alone.

As regards how long til we run out of money - I dont know, but the Govt has a decent buffer €20 in effective cash with the NTMA, €18bn in the National Pension Reserve Fund. If it had to it could impose public sector pay cuts, cut back on infrastructure projects, not put money into the NPRF for the next couple of years.

Now the total of that is dwarfed by the guarantee on banks deposits however that is unlikely ever to be called - in reality all they need is the ability to cover the total bad debts of the banks and the ability to service the everyday needs of the country if even through borrowing at an elevated rate

Économiste Monétaire

gurramok wrote: »

20 bills minus the cash injection for the banks.

The 6 bills were borrowed at a high interest rate, a rate which just so happens has risen since that 6 bills was borrowed

Incorrect. The 20 billion I'm referring to is a liquidity buffer that the NTMA keeps for the government. The money, that has yet to be put forward, for the banks is being rerouted by the NPRF, not the government balances at the central bank, and such. I was outlining how much available cash the government has, not the yield on the bonds/short-term paper, or how easy/difficult it is to raise money in capital markets (unless that was a general point you were making to the OP).

blast05

people are saying 20 bill in the NTAM and 18 bill in the NAtional Pension Reserve Fund. Are these the same thing or have we really got 38 bill :eek:
Even with 20 bill, would it not have made more sense to exhaust this first before borrowing the 6 bill ?
Yeah, i ain't an economist !

Économiste Monétaire

blast05 wrote: »

people are saying 20 bill in the NTAM and 18 bill in the NAtional Pension Reserve Fund. Are these the same thing or have we really got 38 bill :eek:
Even with 20 bill, would it not have made more sense to exhaust this first before borrowing the 6 bill ?
Yeah, i ain't an economist !

The NTMA is senior to the NPRF, with the latter being created after the former. The NPRF is specific to just that: the pension fund. The NTMA has a broader mandate on controlling government borrowings and their reserves, advising on the viability of capital projects, et cetera. The 20 billion in cash is part funded by short-term paper issued by the government, so it's not all our money as such. The NPRF has approx. 1.7 billion in cash, the rest of the 16.3 (+) billion being in other assets.

blast05

OK, so am i right in saying that even if the NTMA could not raise any more funds on the markets, that we still have access to 38 billion (presuming the NPRF assets of 16.3 million were fixed) before we effectively run out of money ?! .... and cheers for the answers.

Économiste Monétaire

blast05 wrote: »

OK, so am i right in saying that even if the NTMA could not raise any more funds on the markets, that we still have access to 38 billion (presuming the NPRF assets of 16.3 million were fixed) before we effectively run out of money ?! .... and cheers for the answers.

Well, I don't know about an exact figure of €38bn. Of the €20bn in Exchequer balances (at the end of 2008), part of that is borrowed on a short-term, renewable basis. Think of it as knowing you'll need to borrow, so you do it in advance in case anything dramatic occurs and you can't access capital markets for a while, to meet short-term liabilities. The NPRF figures are also based on an investment in property funds, which are primarily based in North America and Europe, so I would question the value they've placed on those investments (so does the NTMA in the year end report). Also, the amount which is being proposed for Irish banks (and how that can/will balloon) with possible future write downs in the value of the fund from corporate bonds (default) and, if you really want to be pessimistic, we hold quite a bit in sovereign debt, as far as I know (at the end of '07 we held nearly €1bn in Italian sovereign debt alone, for example) can lead to a reduction in that €16.7bn figure.

If the NTMA were unable to access funding, well that wouldn't be good as we have a ~€5 bond due in April and it would be unable to re-finance that and our short-term borrowings. I guess if you really want a figure just out of curiosity, excluding liabilities, then a ballpark number of an amalgamation of NPRF assets, and Exchequer balances, would be ~€42bn today.

blast05

Cheers for all that. Things ain't quite as bad as i had imagined so given i see that the current gov debt of 76 billion includes the 20 billion held by the NTMA meaning our debt to GDP in real terms at end of 2008 was just 30% .... if my understanding is correct .... and so chances of insolvency are very slim.
From background reading on this, i see that we are still pumping in 1% of GDP into the NPRF .... surely that should be shelved for 2-3 years saving over €1.5 billion per year

Économiste Monétaire

Well, yes, you can argue that. Essentially, they will be borrowing all, or a proportion, of that 1% of GNP to put into the NPRF (and we may end up using all of the NPRF on the banks). Things are bad, though, because our outlook is quite weak, and our finances are very poor with little information on how we will correct this (beyond the recent "addendum"). The NTMA have national debt at €50bn, but the actions of the NTMA are essentially the same as if they were undertaken by the Minister for Finance, so the cash balance is discounted against short-term liabailities. They outline the composition of that debt here.

gurramok

Nice pretty chart here http://bespokeinvest.typepad.com/bespoke/2009/01/country-default-risk-continues-to-rise.html

"These prices measure the cost of protection against default for 38 countries around the world. Specifically, the CDS prices represent the cost per year to insure $10,000 worth of sovereign debt for five years. "

Ireland's risk of default is now worse than Greece, Thailand, Malaysia, Chile, China.

elpresdentde

thanks for all the help and responses. it great to get things clarified and get some kind of reasonable accessment of the state we are in.

CONOR00

At 55,000,000 per day borrowings, about 6 months. At that point bankers will downgrade Irish public sector debt to worthless and no banker in their right minds will lend us anything. It is credit crunch time for the Irish public sector.