Public debt increased by more than 11 per cent at the end of 2022 to around €44,000 for every person in the country, which is one of the highest per capita debt burdens in the world, figures from the Department of Finance show.
The State’s debt stood at €226 billion, up from €203 billion just prior to the pandemic. This is an estimated 86 per cent of national income.
Minister for Finance Michael McGrath published his department’s sixth annual assessment of public indebtedness. He said the key message from the report is that the level of indebtedness remains high despite the return of the debt-income ratio to a downward trajectory.
The report said there are “significant risks” to the public finances, with both immediate and medium-term challenges pressuring the State’s fiscal position, and “clear vulnerabilities” relating to our dependence on corporation tax receipts.
The report further underlined the need to manage the national debt in a prudent manner, ensuring public finances are in a strong position to withstand these challenges.
“The analysis published by my department today highlights the risks now facing our public finances, following the unavoidable increase in public indebtedness during the pandemic,” said Mr McGrath. “The war in Ukraine and the associated energy price shock have induced a cost-of-living crisis, placing renewed pressure on the State’s fiscal position.
“We face these challenges with elevated debt levels; Ireland continues to have one of the highest per capita debt ratios in the developed world. 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.”
Looking ahead, he said the Government is also aware of the major challenges on the horizon. “The need to finance an ambitious infrastructural plan, as well as shifting demographics and the transition of economic activity to carbon-neutrality, will impose large costs on the public finances,” he said.
“Additionally, the public finances are vulnerable to a shock to corporation tax receipts or to the multinational sector in Ireland generally, which could potentially result in a very large deficit.
“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. 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.”