Fund further enhances resilience of the Irish
economy and strengthens public finances
The Minister for Finance and Public Expenditure and Reform, Paschal Donohoe. T.D., has today (Thursday) commenced the National Surplus (Reserve Fund for Exceptional Contingencies) Act 2019. This commencement establishes the National Surplus (Exceptional Contingencies) Reserve Fund, which is more commonly known as the ‘Rainy Day Fund’.
On the commencement of the Act today, Minister Donohoe said: ‘The establishment of the Rainy Day Fund is the culmination of a number of years’ work and delivers on a key commitment in the Programme for Partnership Government. The Government is planning for the country’s long-term future by enhancing the resilience of the Irish economy and public finances to future economic shocks and strengthening the public finances’.
“On foot of today’s commencement, I will shortly issue directions to the NTMA to transfer €1.5 billion from the Ireland Strategic Investment Fund (ISIF) to seed the Fund. I have also signed the necessary Delegation Order for the National Treasury Management Agency (NTMA) to manage the investment of the Fund on my behalf.
“Establishing this Fund is another Government action that better prepares us for any potential Brexit outcome. In the event that the economic impact of a disorderly Brexit is larger than assumed then the funds transferred to the Rainy Day Fund can be deployed to mitigate the impact of Brexit.
“Nevertheless, I am pleased that In spite of Brexit uncertainty, Ireland’s recent and continuing strong economic performance has given the Government a valuable opportunity not just to address the effects of the potential challenges we may face, but also to make prudent provision to alleviate the impact of risks that may arise in the years to follow.“
ENDS
Note for Editors
The purpose of the Rainy Day Fund is to mitigate severe economic shocks, in excess of the normal fluctuations of the economic cycle. In view of the unpredictability of such events, the Act establishing the Fund does not set out specific events that would lead to its drawdown.
Drawdown of the Fund will be a decision for the Minister and Government of the day following an assessment by the Department of Finance. If the Government agrees to drawdown the Fund, then the Minister will seek a resolution of Dáil Eireann authorising drawdown of funds to the Exchequer.
This process ensures that Dáil Éireann will be fully involved in any future decisions regarding drawdown, and decisions on expenditure of the monies will be subject to voted expenditure procedures.
The in-year contingency reserve is intended for events which are not reasonably foreseeable, such as, for example, a recurrence of foot-and-mouth, or multiple severe weather events.
The Rainy Day Fund is intended to be used as a defined-purpose instrument to address severe, unanticipated events, as opposed to the normal fluctuations within the economic cycle. This approach would align it with the current EU fiscal rules framework under the existing Stability and Growth Pact provisions.