The dramatic reduction follows a 15% fall last year and comes on the back of a new system allowing defaulters to pay their court fines by instalment.
Tánaiste Frances Fitzgerald welcomed the development and said it represented a “sea change” in penal policy.
Official figures show that 1,178 people were committed to prison for failing to pay fines in the first three months of 2017, compared to 2,324 in the same period in 2016 (-49%).
Figures for the whole of 2016, show that 8,439 fine defaulters were jailed, compared to 9,883 in 2015 (-15%).
Launching the Irish Prison Service and Probation Service annual reports for 2016, the justice minister said the “vast majority” of these individuals should not be jailed.
Ms Fitzgerald said people had been waiting a long time for the Fines Act 2014 to become fully operational, which happened in January 2016 when a system was put in place allowing offenders to pay fines by instalment.
The instalment system was the final piece in a range of measures introduced by the act, which lays out a series of options the court must consider before sending an offender to prison.
Ms Fitzgerald said: “That’s a sea change, an absolute sea change. The vast majority of these people should not be in prison.”
Of the 8,439 fine committals in 2016, 2,177 (26%) were female.
The fall in fine-related imprisonment contributed to a major drop in the total number of people being jailed, from 17,206 in 2015 to 15,099 in 2016, the lowest number in eight years.
IPS director general Michael Donnellan said the reduction was across most prison terms, including those serving less than three months and 12 months.
He said there were other developments last year, including the opening of the new Cork Prison, at a cost of €44m, and the refurbishment of Mountjoy Prison, which was now all single cell with modern in-cell sanitation.
He said Mountjoy West (the old St Patrick’s Institution) was now becoming an enhanced regime and would be drug free and could house up to 180 inmates.
He also pointed out that the recruitment of prison officers restarted in 2016, the first time in eight years.
In relation to prison officer calls to house all gang bosses in one facility, he said the strategy was to “separate and disperse” them — not to put them all together.
The report showed that female committals fell last year after 12 years of increases. However, while the number fell (from 2,918 to 2,546), females still accounted for 20% of all committals in both years.
The Irish Penal Reform Trust welcomed the ending of slopping out and the imprisonment of children, but said other acute issues persisted including “inadequate healthcare, the detention of people with serious mental health issues, violence and over-reliance on prolonged solitary confinement to ensure prisoner safety”.
Acting executive director Fíona Ní Chinnéide called on the minister to publish existing prison inspector reports and also called for an increase in open prisons.