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Ireland’s national debt reached equivalent of €42,500 per person in 2018

Ireland’s national debt reached equivalent of €42,500 per person in 2018

The amount of debt owed by the state rose to the equivalent of €42,500 for every person in the country last year, according to a new report released by the Government.

The Annual Report on Public Debt shows that Ireland’s debt mountain stood at €206bn at the end of 2018, up €5bn compared to a year earlier.

This means Ireland has one of the highest per capita public debt levels in the OECD, the report says, and is also elevated compared to Irish historical standards, leaving the country vulnerable.

According to the Minister for Finance, Paschal Donohoe, international economic and political uncertainty coupled with growing demographic pressures in the coming years means prudent fiscal policy, reduction in the debt and a continuation of budgetary surpluses need to be key priorities.

“An important milestone was reached last year when a budget surplus was recorded for the first time since 2007,” said Paschal Donohoe.

“However, public indebtedness remains too high. It is crucial that we build on the solid progress made in recent years and run budget surpluses to prevent the build-up of additional debt.”

The report says that the national debt reached 104% of modified Gross National Income or GNI* – a measure of the size of the economy here that strips out distorting globalisation effects like multinational company income leaving the state, as well as various forms of depreciation.

It also warns that Ireland’s debt repayment situation is extremely sensitive to any economic growth shocks.

But it says that over the medium-term, the debt-to-income ratio is projected to continue to improve, while at the same time remaining high.

“Reflecting the distortions inherent in Irish GDP, it is imperative to bring debt down to levels more consistent with the economy’s underlying dynamics,” states the analysis.

“At the same time, any potential windfall receipts, notably from corporation tax revenues, as well as proceeds from asset disposals should be used to reduce the stock of debt, as is Government policy.”

Sustainability of the public finances will face significant challenges from the projected ageing of the population over the coming decades unless there is a policy intervention, it also cautions.

€5.2bn was paid in interest on the borrowings last year, according to the document, a similar amount as the entire capital budget for the same period.

However, despite the challenging situation, the analysis also points out that active management of the national debt by the National Treasury Management Agency has led to a reduction in the interest bill and an extension of the repayment dates on what has been borrowed.

“Building on the outturn in 2018, a prolonged period of general government surpluses should facilitate a stronger path of debt reduction, while building buffers to counter future negative surprises,” the report states.

Ireland’s per-capita public debt last year, at €42,547 is €31,811 higher than it was in 2005, prior to the economic crash.

This is the third year that the report has been produced, with the aim of providing a comprehensive analysis of the public debt situation here.

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