The Minister for Finance and Public Expenditure and Reform, Paschal Donohoe T.D., today (Thursday) announced that the Government will refocus the Ireland Strategic Investment Fund (ISIF) on key Government priorities to ensure that the needs of the Irish economy, which is experiencing strong growth, are being met. This takes account of the risks that may be posed by economic overheating and the appropriateness of ISIF’s investment mandate given our current economic performance. Priorities include the delivery of Project Ireland 2040, supporting housing delivery, and enhancing the resilience of our economy and public finances.
In making this decision, the Government also took account of the wider challenges facing the State, including: Brexit, the nominal level of public debt, national competitiveness, global economic uncertainties and geopolitical risks. The reallocation and refocussing of ISIF’s funds will better target Government interventions in addressing these challenges, ensuring we are better prepared for what lies ahead.
Minister Donohoe has recommended that the ISIF should move from a broad investment strategy that is focused on all sectors, to a focus on the priorities that will support Project Ireland 2040 and have a more direct and positive impact on the economy’s long-term growth potential. These priorities include key sustainable economic challenges, such as investments that support:
- Indigenous industry;
- Regional development;
- Sectors adversely affected by Brexit;
- Projects to address climate change; and
- Housing supply.
On this basis, the Government has decided to refocus ISIF funds along the following lines:
- The reallocations of the ISIF funds will be made through legislation going through the Oireachtas, including the legislation establishing Home Building Finance Ireland and the Rainy Day Fund.
- The Minister for Finance will be writing to the Chief Executive of the NTMA to inform him of the Government’s decision to request that ISIF develops a refocused investment plan, which ISIF will now develop.
- The Minister’s officials have already held discussions with ISIF so as to allow it to begin preparatory work on the refocused investment strategy.
Speaking about the decision to refocus ISIF funds, Minister Donohoe stated: “I welcome today’s Government’s decision to reallocate Ireland Strategic Investment Fund (ISIF) resources to address the key challenges that our State faces. ISIF’s refocused investment strategy will support the delivery of Project Ireland 2040 through investments in indigenous industry, the regions and sectors affected by Brexit. As previously stated, €1.5 billion of ISIF funds are being allocated to the Rainy Day Fund with an additional €750 million going to the Home Building Ireland Finance initiative, which will better prepare us to meet future downturns that may lie ahead, and to help us to meet the needs of our citizens.”
Background to Government decision
The Government decision on ISIF is based on the statutory review of ISIF’s investment strategy as required under section 40 of the National Treasury Management Agency (Amendment) Act 2014, and also detailed analysis of the State’s economic and fiscal position by the Department of Finance, and the key challenges now facing the State.
The review of ISIF concluded that ISIF is meeting its statutory objectives of economic impact and a commercial return, and ISIF has leveraged higher levels of investment in the Irish economy than initially forecasted. However, the review also flagged the need for further consideration of the appropriateness of ISIF’s investment mandate given the current performance of the Irish economy and the wider challenges to the State. The Government and the Minister are particularly aware of the risks posed by economic overheating, for which the Government has adopted a broadly neutral Exchequer fiscal strategy.