Cash flow Government borrowing ‘far higher than anticipated but still affordable’
The Government is predicting a deficit of 21 billion euro or 6% of national income for this year.
The Government’s level of borrowing will still be affordable this year despite being “far higher” than ever expected due to Covid-19, the Finance Minister has said.
Paschal Donohoe warned the longer the virus existed the more challenging it would become to fund the “extraordinary measures” implemented to help people and businesses impacted by the virus.
He said the Government was now predicting a Government deficit of 21 billion euro or 6% of national income for this year.
Next year the Government has predicted a pre-Budget deficit of 14.5 billion euro if no policy changes were made.
The projections were contained in the Government’s pre-Budget White Paper published on Friday ahead of next Tuesday’s Budget.
But Mr Donohoe warned the figures were subject to an “unprecedented degree of uncertainty” caused by Covid-19.
“We anticipate before any additional decisions are taken on Budget day, and on the basis of current public health guidance, a general Government deficit of just over 21 billion euro for the year,” he said.
“This would be the equivalent of approximately 6% of national income.
“For next year we anticipate a pre-budget deficit of 14.5 billion euro if there were no policy changes, this is the equivalent of just over 4% of GDP.”
Mr Donohoe emphasised these figures were subject to “an unprecedented degree of uncertainty with potential further change within 2020 and clearly the potential for significant change in 2021”.
Asked how long the country could afford the increased expenditure arising from Covid-19, Mr Donohoe said the level of borrowing for this year will be “far higher” than “ever expected and will go right onto our national debt”. But he said it was “affordable”.
He said next year the Government would “begin the journey” of reducing the deficit but that it would be doing so in an “atmosphere of so much uncertainty” caused by the pandemic.
“I’m absolutely confident that whatever decisions this Government makes will be decisions that this country will be able to afford,” he said.
“The longer we live with this virus, the more challenging it will be regarding how we can fund some of the extraordinary measures at the moment.”
Public Expenditure Minister Michael McGrath said the Government’s priority was to ensure that money is set aside in a recovery fund that could be used to support the economy next year as it responds to Brexit and Covid-19.
Mr McGrath said Government expenditure for the year was now estimated to be in the region of 86.5 billion euro, adding that figure was driven by additional funding of around 16 billion euro spent on responding to the Covid-19 crisis.
The Fianna Fail TD said that this funding had enabled the introduction of a wide series of measures to support key public services and “cushion as best we can the impact of the pandemic on households and businesses”.
The Government predicted that next year between eight billion euro and 8.5 billion euro will be required, on a no policy change basis, to meet ongoing costs arising from the pandemic.
Mr McGrath said no final decision has been made about the Christmas bonus for social welfare recipients.
“We’re very conscious on one hand that it has been a very difficult year for so many people, including many people who lost their jobs, but on the other hand the Exchequer is in a very strained position as a result of all the additional costs we’re had to incur,” he said.
The Fianna Fail TD added that all of the various considerations will be “weighed up” in the coming days and that he expected a decision would be made on the matter next week.