The board of the Health Service Executive (HSE) will today be told that the organisation recorded a financial deficit of €222 million up to the end of August.
It is understood that the bulk of this overrun is due to overspending in the hospital sector and on statutory demand-led schemes such as the drug payment plan, which subsidises the cost of medicine for patients.
The Irish Times disclosed on Tuesday that the HSE had forecast that these statutory schemes could overrun the official budget by €168 million by the end of the year. The HSE has an overall budget of more than €13 billion for the year.
In a statement last night the HSE's national director of finance, Liam Woods, said the pause on recruitment was a temporary measure designed to assist the organisation to balance its financial position for 2007.
"The key priority is to ensure that the expansion of services, as has been delivered by the HSE each year since its establishment, is maintained," he said. "To date this year, the HSE has already exceeded its targets and has treated substantially more people than the same period last year."
The Department of Health has told Ministers that unless remedial action was put in place, the HSE would face an overall budget deficit of €400 million by the end of the year.
The Department of Finance has expressed strong concern at the HSE's deteriorating financial position and has advised Minister for Finance Brian Cowen on the issue.
Yesterday, the HSE management told senior staff that it was putting in place a ban on recruitment, including frontline health service personnel, as part of moves to curb its growing financial deficit. This measure will be reviewed in October.
Hospital consultants, who met senior health service management in talks on a new contract yesterday, lodged a formal protest at what they described as "swingeing cutbacks".
The Irish Hospital Consultants' Association (IHCA) said that the cutbacks would impact on patient care.
However, a spokesman for Minister for Health Mary Harney said that, based on assurances received, the Government believed that frontline services for patients would not be affected by the HSE moves.
The spokesman said the Government was conscious of the performance of the HSE this year in treating an additional 10,000 inpatients and 10,000 day cases in hospitals.
However, the IHCA said that it was "appalled" that frontline clinical services were to be severely restricted to balance the HSE books.
Meanwhile, it has emerged that if the recruitment ban were to continue in the months ahead, it could impact on proposals by the HSE to appoint nearly 4,500 additional staff.
The department has confirmed it has received an application from the HSE for approval for the recruitment of 4,438 whole-time equivalent staff.