Minister McGrath welcomes improving public debt position and highlights risks to outlook
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Minister for Finance publishes Department of Finance’s seventh Annual Report on Ireland’s Public Debt.
The Minister for Finance Michael McGrath has today (21 February 2024) published his department’s seventh annual assessment of public indebtedness in Ireland. The Annual Report on Public Debt in Ireland 2023 is a forensic assessment of public debt dynamics and is prepared to shed light on key strengths and vulnerabilities in the public finances.
The key message from today’s report is that while the debt-income ratio continues to be on a downward trajectory, several known structural changes will pose significant challenges in the coming decades.
Commenting on the analysis set out in the Report, Minister McGrath said:
“There are many positive aspects to welcome in the Public Debt report we are publishing today: our gross nominal debt has declined from its peak in 2021, we are running a General Government Balance of close to 3% of national income, we have substantial cash reserves on hand and our credit rating has been steadily improving. This illustrates the importance of ongoing prudent management of the public finances.
"However, there are risks associated with our debt which we must be conscious of. While structural aspects of Ireland’s debt have, so far, insulated the public finances from the impact of higher interest rates, this will not last forever. Indeed, a significant portion of public debt will be exposed to higher interest rates in the coming years.
"In addition, the underlying fiscal position is less benign than the headline figures suggest. The tax base is relatively narrow and the public finances remain exposed to a shock to corporation tax receipts; product- or sector-specific shocks could potentially affect income tax receipts also.
"Beyond the near-term, the Irish economy faces significant structural change: demographics, decarbonisation, digitalisation and de-globalisation – collectively the “4Ds” – will all have implications for the public finances.
"This is the reason why I am preparing legislation for the establishment of two longer-term savings vehicles: the Future Ireland Fund and the Infrastructure, Climate and Nature Fund. The objective of these funds is to ring-fence ‘excess’ corporate tax receipts in order to help finance these structural challenges.
"I am determined that we make the correct decisions now to ensure that we secure the State’s ability to deliver public services over the decades ahead.”
This is the department’s seventh annual assessment of public debt dynamics. Projections contained in the Report are based on the department’s autumn 2023 forecasts.