Exchequer deficit stands at €7.1bn

State coffers are €7.1bn in the red as Government books are opened again for International Monetary Fund inspectors.

Finance Minister Michael Noonan warned the tax take would have to be closely watched as VAT and income tax appeared weak.

Official figures from the Department of Finance said the tax take between January and March was €7.5bn – €270m above the same period last year.

But revenues were €136m lower than expected with VAT and income tax not performing as strongly as hoped.

With officials from the IMF and Europe due to arrive tomorrow to review the State’s books, Mr Noonan said financial figures are hitting targets set in the multibillion-euro international bailout.

But the minister warned: “Today’s figures show a mixed performance in the individual tax categories.

“VAT and income tax have shown signs of weakness and, given their importance, their performance will need to be closely monitored in the coming months.”

The three-month report revealed income tax and VAT returns were €125m and €179m lower than expected.

The poor return was offset by better-than-predicted excise duty and corporation tax returns, coming in at €60m and €78m over target.

Mr Noonan said that while the poor VAT and income tax returns were a concern, the targets set out in last December’s budget remain on track.

Public Service Reform Minister Brendan Howlin said public spending stood at €10.9bn but is €255m below expectations.

Officials from the IMF, the European Central Bank and European Commission are due in Dublin tomorrow for a 10-day quarterly review of the multibillion-euro bailout deal struck last November.

A Department of Finance spokesman said the Exchequer returns would form part of the discussions.

“The exchequer returns are setting out how the finances are progressing, so today’s figures will be key to that first quarter assessment, he said.

The arrival of the IMF also coincides with a diplomatic charm offensive by Tánaiste and Foreign Affairs Minister Eamon Gilmore to promote Ireland’s case for cheaper bailout loans.

The rounds of talks will be kick-started this week with a series of meetings between Mr Gilmore and EU ambassadors.

Mr Noonan is due to meet other EU finance ministers in Hungary later this week to brief them on Government plans to pump another €24bn into the State’s failing banks and to shrink the sector from six lenders to two so-called pillar banks.

Both Mr Noonan and Mr Howlin claimed the plans would help boost the country’s economy.

“These decisions combined with the implementation of the Programme for Government will put Ireland on the road to economic recovery,” they said.

“The Government is now moving on to the next phase of our plan, the Jobs Fund, which will create a more attractive environment in Ireland for investment and job creation.”