(Bloomberg) -- Ireland’s government pumped just over €4 billion ($4.4 billion) into its new sovereign wealth fund, which it aims to grow to more than €100 billion ($108 billion) as part of a plan to better manage its finances.
The payment means there is now €8.4 billion in the so-called Future Ireland Fund, the finance ministry said in a statement Wednesday. Previous transfers came from the National Reserve Fund, which is being wound down, but this is the first payment based on a strategy to pay in the equivalent of 0.8% of GDP every year and build up the pot over time.
Ireland is in the enviable position of having the money to spare and is on track to post a large budget surplus this year. Much of that, however, is down to volatile corporate tax revenues. The goal of the fund, and a second one known as the Infrastructure, Climate and Nature Fund, is to create resources that can be tapped to protect the economy from future downturns and cover long-term costs related to an aging population and climate change.
In addition to the huge tax income receipts from companies such as Microsoft Corp. and Pfizer Inc., Ireland is also getting a €14 billion back-tax payment from Apple Inc. after a European court ruling this year.
“These two long-term savings funds are a vital element of managing the state’s finances in a prudent and responsible manner over the coming decades,” Finance Minister Jack Chambers said.
Ireland expects both funds to reach a combined total of €10 billion this year, rising to €16 billion by the end of 2025.
They will both be managed by the debt office, the National Treasury Management Agency, which has made new appointments to its board to oversee the fund.
“We are currently designing appropriate long-term strategies for each fund and putting in place the necessary people, skills and supporting infrastructure to manage the funds for the long term,” NTMA CEO Frank O’Connor said.
The NTMA has interim investment strategies for the two funds, and will initially invest the money in a low-risk, high-credit quality portfolio of sovereign and quasi-sovereign bonds with an “aim of generating stable and reliable returns with minimal risk.”
©2024 Bloomberg L.P.