Donohoe to eliminate Ireland's emergency borrowing over next two budgets

Finance minister plans to phase out pandemic borrowing while NTMA chief signals positive state of Ireland's finances

Finance Minister Paschal Donohoe said his aim is that, by 2023,  State borrowing will be solely for capital expenditure rather than emergency support. 

Finance Minister Paschal Donohoe has pledged to phase out Ireland’s high borrowing levels, which are being used to aid the economic recovery, over the next two budgets.

The Government envisages that from 2023 onwards its borrowing needs will solely be for regular capital expenditure purposes.

“My focus is absolutely now on ensuring that by 2023 we have eliminated all the high levels of borrowing that we had to put in place to help us respond back to Covid," Mr Donohoe said.

"That is one of the reasons why we are making changes to the pandemic unemployment payment this week," he said.

Ireland borrowed €34bn more than planned

Speaking at an online event organised by iFac — the specialist professional services firm for farmers and the agribusiness sector — Mr Donohoe said Ireland has already borrowed €34bn more than planned to deal with the economic destruction caused by the pandemic.

To eliminate all of our borrowing across a single budget I think could be economically risky. To attempt to do it over three budgets creates the political risk that it will never happen. So, I’m doing it over two budgets, which is what the Government has agreed to, I believe is the safe and sensible way of dealing with it. 

Mr Donohoe said he does not plan to change his October budget plans, with a €4.7bn package having been set out in last month’s summer economic statement. This is despite better-than-expected tax receipts this year and corporate tax income potentially reaching €1bn. 

He warned that level of corporate tax income could be gone by 2023, with Ireland already facing risks in its reliance on corporate tax.

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Meanwhile, NTMA chief executive Conor O’Kelly has said Ireland is in a much healthier position exiting the Covid crisis than it was when coming out of the financial crisis, with disposable incomes on the rise and the State borrowing at minimal interest rates.

Mr O’Kelly said: “In both crises, Ireland had to borrow heavily, but the returns on that investment could not be more different.”

The NTMA is raising a further €1.25bn or so this week on the back of the €14.75bn it has already raised.

"The average interest rate on Ireland’s debt will fall to a record low of 1.5% this year as the interest bill drops below €3.5bn," Mr O'Kelly said.