reminded us on Wednesday of a potential rip tide in the current of positive exchequer data. Announcing another strong set of exchequer returns for January, showing the Government netted €6.7 billion in tax receipts last month , he noted that since the pandemic began, the Government’s approach has been to support the economy through a counter-cyclical budgetary policy to mitigate the effects of the Covid-19 outbreak.
“This has led to a significant increase in public debt which is now approaching a quarter of a trillion euro, the equivalent of €47,500 per capita, a figure that is amongst the highest in the developed world,” he said. Ireland’s monster debt – it was put at €237 billion at the end of December – has gone somewhat under the radar in recent years. This is largely because interest rates are so low, making the burden of carrying such a big liability less onerous, particularly for a strong-growing, relatively wealthy economy like the Republic.The State is also insulated from the immediacy of an upturn in borrowing rates by the fact that recent bond issuance is long-dated and, in the main, at a fixed rate.
The Department of Finance’s chief economist, John McCarthy recently warned that the Irish economy was in a “finely balanced position” and that budgetary policy would have “to walk a fine line” between supporting the economy and ensuring fiscal sustainability. He noted that the State’s national debt would have to be refinanced in the coming years potentially at higher borrowing rates.
One positive of inflation as long as rates don't rise....
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