Ireland's government should sell more bank shares sooner rather than later to reduce the risk of their value falling and to cut the state's still high debts, the head of the country's debt agency said on Monday.
Ireland still has majority stakes in Allied Irish Banks and permanent tsb, and a 14% holding in Bank of Ireland, the only three domestic lenders to survive the euro zone's most costly bank rescue a decade ago.
Dublin last offloaded shares a year ago, when it sold almost 30% of AIB for 3.4 billion euros.The bank's shares are 9% up on the initial public offering price of 4.40 euros but were as much as 31% higher in January.
"What I'm pointing out is that this late in the investment cycle there is a higher degree of risk that there will be a material fall in the value of those shares than there has been in previous years," Conor O'Kelly told a news conference.
"There are a lot of shares and they will be sold off over a long period of time and you have to average your way out of that to some degree but you've got to get started at some point and I think the sooner the better. Relying on the investment markets to always be there for you can be difficult."
While Ireland's debt-to-GDP ratio has almost halved to 68% since 2013, O'Kelly said investors were not interested in that measure "for obvious reasons."
The role of Ireland's large multi-national sector has reduced the relevance of using gross domestic product as an accurate measure of the economy after annual growth of 26% was recorded for 2015 following a massive revision to the country's stock of capital assets.
Instead O'Kelly said that with Ireland's stock of debt still rising and among the highest in the euro zone as a percentage of general government revenue, its ability to absorb future shocks would be limited without taking opportunities to pay down debt.
"We have to recognize just how vulnerable we are in the medium to long term while our debt is still as elevated," he said.
Ireland is also exploring diversifying its fund raising to include the sale of green bonds and hopes to make its debut in that "very interesting space" in the next six to 12 months, O'Kelly added. (Reuters)