Ireland’s national debt now stands at 44,000 euro per person in the country, one of the highest per capita debt burdens in the world.
The Minister for Finance warned that this is concerning, as Ireland remains exposed to fiscal shocks due to its reliance on corporate tax receipts, but said that he still expects the Irish economy to grow in 2023.
Michael McGrath also said that some one-off cost-of-living measures that are due to run out in the coming weeks would be extended, adding that they would not be continued “indefinitely”.
“I and the government acknowledge that the cost of living remains very high still for many people around the country,” he told reporters in Dublin.
“It’s clear that some of these supports will need to be extended beyond that date, but I must also be clear, however, we cannot afford to continue with that level of support indefinitely.”
The Department of Finance published figures on Friday that show Ireland’s public debt increased to 226 billion euro at the end of last year.
This is up 11% from 203 billion euro before the Covid-19 pandemic, when the debt per capita stood at 41,300 euro.
The national debt now stands at 86% of Ireland’s gross national income, which is down from pre-pandemic levels.
On Friday, the Department of Finance published its sixth annual report on public debt in Ireland. It warned of “significant risks” to the public finances in the years ahead, with both immediate and medium-term challenges pressuring the state’s fiscal position, and “clear vulnerabilities” due to dependence on corporation tax.
This report underlines the need for prudent management of debt and the rebuilding of our fiscal buffers— Michael McGrath, minister for finance
Mr McGrath said the increase in public indebtedness was “unavoidable” due to the pandemic, with around 32 billion euro used to limit the economic and societal fallout following the public health restrictions.
The cost-of-living crisis caused by the invasion of Ukraine has squeezed public finances even more, he said.
This comes amid other challenges to the public finances that Ireland is facing already, including Ireland’s attempts to wean itself off huge corporate tax revenues, putting funds aside to care for Ireland’s aging population, and climate financing.
“Furthermore, the underlying fiscal position is not as strong as the headline figures would suggest,” Mr McGrath said on Friday.
“The tax base is narrow, and the public finances remain exposed to shock in corporate tax receipts, or the broader income tax revenues associated with these multinational enterprises.
“On top of this, an adverse shock to the economy in general, is always a risk.
“In the short term, we face the fiscal impact of the war in Ukraine, and the cost-of-living challenges. In the medium to long term, an aging population, climate change, and the need to finance an ambitious infrastructure plan will all impose large costs on public finances.
“Several structural features of Ireland’s debt, with the majority of debt locked in at fixed prices and relatively long maturities, insulate us somewhat from the changing interest rate environment brought about by these shocks.
“Nevertheless, the refinancing of our existing debt over the medium-term will most likely lead to increased debt servicing costs, the first call on the public finances.”
Mr McGrath said that exchequer returns for January show “a strong momentum” and that he expects the Irish economy to grow in 2023 “despite the international economic headwinds that we are facing”.
“It is essential that the public finances stand ready to deal with these challenges. This report underlines the need for prudent management of debt and the rebuilding of our fiscal buffers,” he said.
“Government is committed to cultivating a dynamic and sustainable economy, while ensuring our ability to meet the fiscal challenges that lay before and ahead of us.”
