What is the point of a rainy day fund?

Hi Duke,

Government Debt profile for Ireland out to 2053. The average debt maturity is around 11.7 years according to last NTMA Annual Report

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The first thing you see if the big hump in 2019 and 2020 - on reflection the interest rate some on these bonds might have been at 6-7% (Remember they came out before the call for help was issued to Europe and the IMF). The IMF loans have been paid off in full by refinancing (Interest rate saving around 3% per annum give or take).

Two other things to consider in terms of repayment - the Government could use the cash it gets for AIB (it still owns 70% of it - I guess a valuation of 10bn euro is not unreasonable?) and if the Apple Tax issue is sorted in our favour, then that would cut the debt by 10% anyway, maybe more. You could also include the BOI shareholdling too (still owns 14% of this company).

Equity assets (such as AIB and BOI) are not included in the net debt figure I mentioned earlier, but they can have a big impact on reducing our debt.

In connection with the Rainy Day Fund, I am ambivalent - to be honest, I'd be happy enough to have a cash or cash like buffer handy to keep us out of trouble, but I would be worried that it could be misused (if it was spent on cpaital projects, that's one thing but to raid it for current spending would be problematic in most circumstances.

Best,

Opus 2018.
 
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It seems to me quite the opposite - get further in hock with a view that if we misbehave in future and our borrowing costs go up we can raid the piggy bank.

"Honey, don't mind the 50 grand in loans we have, we have 3 grand in the bank!!" says the husband eagerly awaiting the Amazon Black Friday sale...
 
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