The national debt now stands at more than €47,200 for every person in the Republic, official figures show.
Public debt increased by €33 billion during the Covid-19 pandemic to €237 billion, Minister for Finance Paschal Donohoe confirmed on Tuesday.
This is equivalent to €47,233 for every person in the Republic, one of the highest in the world, he acknowledged.
A Department of Finance report indicates that public finances can absorb the extra cost of supporting businesses during the pandemic.
The department calculates that the ratio of national debt to the Republic’s total income should soon begin falling.
“However, several factors could jeopardise this,” the report found. “The public finances remain exposed to a fall in the corporation tax yield. An adverse shock to the economy is an additional risk.”
Mr Donohoe said the national debt had stabilised. “The public finances will return to a more balanced path,” he added.
The Minister cautioned that taxes on corporate profits could decline from high levels enjoyed in the run-up to the pandemic.
He also highlighted that the Republic’s ageing population could soak up up increasing resources in the years to come.
Climate change poses a third challenge to public finances, as the State will face a growing bill for the changes needed to combat this, Mr Donohoe warned.
‘Appropriate response’
The Minister argued that borrowing and spending to support incomes and businesses was the “appropriate response” to the pandemic.
As the Covid tide is turning, the Government plans to slow, and ultimately stop, borrowing.
Mr Donohoe pledged that ending the high rate of borrowing would not come at the expense of spending on hospitals, schools and infrastructure.
Unlike many European Union states, the Republic’s wealth continued growing in the face of almost two years of lockdowns.
That growth and the positive outlook for the economy would aid the State in controlling its debt, the Minister said.
The Republic also has “significant financial assets on its balance sheet”, giving efforts to ease the burden a further advantage.
Department of Finance figures show that the interest the State pays on public debt is falling.
The Republic is now paying 1.5 per cent on its national debt, down from 4.5 per cent 15 years ago.
That mirrors in the picture in all other EU states that use the euro as their currency.
Their “effective interest rates” are 1.5 per cent, 3 per cent less than a decade and a half ago.
