Ireland wants to set up a huge sovereign wealth fund. This is made possible by a budget increase worth billions. A few years ago the country was on the verge of bankruptcy.
The Irish government’s new sovereign wealth fund is expected to be worth 100 billion. The goal: use the billions to support the state pension and reduce climate costs. The fund, called the “Future Ireland Fund,” is made possible by the country’s high budget surpluses.
From 2024 to 2035, Ireland wants to invest 0.8 percent of the nominal – i.e. not inflation-adjusted – gross domestic product in the new fund, Finance Minister Michael McGrath announced today. This corresponds to around 4.3 billion euros annually. The 100 billion euros should then be achieved with a targeted return of four percent.
Ireland with billions Budget plus
Ireland is currently one of the few EU countries that generates a budget surplus. According to the International Monetary Fund (IMF), the increase in revenue for 2022 will amount to six billion euros. The IMF is also predicting billions in surpluses for Ireland in the coming years.
In 2009, after the financial crisis, Ireland was on the verge of bankruptcy. The trend reversal was made possible by an increase in the amount of corporate taxes paid by foreign companies. Numerous multinational corporations have their European headquarters on the island, including Facebook and Google.
Second fund as a buffer against a downturn
“This is a realistic and achievable plan for Ireland,” McGrath told Parliament in his first budget speech as finance minister. The government will also set up a second, smaller infrastructure and climate fund worth 14 billion euros. It is intended to help provide funds to reduce greenhouse gas emissions. It is also intended to serve as a buffer against cuts in investment in a future downturn.
The Ministry of Finance expects economic growth of 2.2 percent for both the current and next year. For comparison: According to forecasts by leading institutes, the German economy will shrink by 0.4 percent this year and then grow by 1.3 percent in 2024.