The amount the State pays in interest on the country's borrowings is going to rise in the coming years, a new report from the Department of Finance has warned.
The Annual Report on Public Debt says that Ireland owed €218 billion at the end of last year.
It amounts to €40,500 per person, which the report says is "high relative to other advanced economies", and almost €8,000 higher than the average across the EU.
About €77 billion of Ireland's debt falls due in the next five years.
Much of the country’s borrowings is locked in at relatively low interest rates.
When that debt is refinanced, Ireland will have to pay a higher rates.
Relative to Ireland’s national income, public debt amounted to 68% last year, nearly 30 percentage points lower than just before the pandemic when borrowings peaked at €236 billion.
Minister for Finance Paschal Donohoe warned: "The near-term, structural changes in the Irish economy, demographics, decarbonisation, digitalisation and de-globalisation will all have adverse consequences for the evolution of public debt and the public finances as a whole."
He also warned that "the underlying fiscal position is much less benign than the headline figures suggest.
"The headline budgetary surpluses in recent years have been driven by significant increases in corporation tax receipts over the past decade. This volatile revenue stream arises from just a handful of firms."
He said for this reason the Government will continue to invest in two long term savings funds to "mitigate the risks posed by these challenges."
Speaking on RTÉ's Morning Ireland, Minister for Finance Paschal Donohoe said the higher cost of the country's debt is certainly something that the Government has to be aware of and plan for and is why the Government is running budget surpluses and investing in the Future Ireland Fund.
But Mr Donohoe said the Government is going to "change gear" in regards to spending, adding that it needs to "pull it down".
"When we put together Budget 2026, given that we're looking to invest so much in our country's future, €112 billion in the next few years, we do need to ensure that we change gear a bit now in current spending because inflation has come down by so much," the Minister said.
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On the 5% target on spending increases that the Government set, he said that the world has changed since that policy was introduced.
"The whole world changed just when we brought in that rule. We looked to respond, and we still have a big budget surplus," he stated.
He added that the Government will submit later this year its plan on public spending over the next number of years.
On cost-of-living measures, he said we have to adjust how the Government spends money and in Budget 2026 there will be measures that will be targeted and long-term.
He said that he and Minister Jack Chambers will look at how they can bring to an end the supports of the past.
But he added that they will go back to what they used to do in the past as well, which is that "every single budget has brought forward measures that are permanent, that we believe we will continue to be able to afford and will be more targeted."
In relation to infrastructure, he said the Government is "serious" about improving that and significant planning reform has been introduced. That is why the national development plan that has been brought forward includes €112 billion across the next number of years," he added.
