Irish debt burden among highest per capita in the world at €44,250
The national debt stood at €226 billion at the end of last year, according to the Department of Finance’s Annual Report on Public Debt in Ireland.
That is equal to €44,250 for every man, woman and child in the country and is one of the highest per-capita debt burdens in the world, according to the report.
Debt as a percentage of the size of the economy is going down, however.
Last year it was equal to 86.4% of GNI* which is a measure of the economy which strips out some of the effects of the multinational sector. This year it is projected to decline further to 81.6% of GNI*.
At its height during the Covid crisis, gross national debt was €236.1 billion in 2021 or 101% of GNI*.
Before Covid in 2019, gross debt was €203.4 billion or 96.5% GNI*.
At its height relative to what was a smaller economy, debt during the financial crisis rose to 165% GNI* in 2012.
Today’s report says in the short-term, the war in Ukraine and tightening monetary policy have implications for the public finances as does “any fallout from the ICT sector shock”.
Over the longer term, the ageing population and climate change “pose challenges”.
The report also notes that the way public debt is structured “insulates” the public finances from increases in interest rates in the short term.
It says approximately three quarters of gross national debt is at rates below 2%, while the average maturity of our debt is over ten years.
However, it warns that refinancing our debt will cost more because bond rates have risen.
It also warns the public finances are exposed to a potential shock when it comes to corporation tax “particularly when combined with an underlying shock to domestic activity” that might happen prior to any hit to corporation tax receipts.
The Minister for Finance Michael McGrath said the analysis published today highlights the risks now facing the country’s public finances after the unavoidable increase in public indebtedness during the pandemic.
“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,” Mr McGrath said.
But he said that several structural features of the country’s debt, with the majority of it 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 re-financing of our existing debt over the medium-term will most likely lead to increased debt servicing costs, the first call on the public finances,” he stated.
The Minister 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,” he stated.
Mr McGrath said it is essential that the public finances stand ready to deal with these challenges, adding that the report underlines the need for prudent management of debt and the re-building of our fiscal buffers.