The Finance Minister has said that Budget 2023 cannot become “part of the problem” when it comes to rising cost of living.
Pascal Donohoe told a conference Friday that the government will target the “lowest” level of required borrowing next year and wants to help only the most vulnerable, so as not to increase debt levels or cause prices to rise further.
Mr Donohoe called for a “perspective” given the uncertain economic environment and rising borrowing costs.
Bond prices are rising along with other eurozone countries in anticipation of an upcoming hike in interest rates by the European Central Bank, which will be confirmed this week starting in July.
“The days of cheap funding are gone,” Donohoe said Friday morning at the Economic and Social Research Institute’s (ESRI) annual budget conference.
“We will target the lowest level of borrowing needed to respond to the various developments and tensions in society and government.”
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He said the government would aim to “further reduce the debt-to-income ratio” next year, while pledging to help those most affected by the rising cost of living.
Government debt accounts for 96.5 percent of national income, which is lower than the European average, but the government is targeting a ratio of around 80 percent by 2025.
Mr Donohoe warned that no further welfare measures should fuel inflation, which hit a 38-year high in May of 7.8 pc – or 8.2 pc according to the EU harmonized measure.
“Certainly, we will continue to recognize and address the cost of living challenge, but overall we need to create a budget and then deliver a budget that by itself obviously does not add to the ongoing inflationary pressures.
“Budgetary policy itself should not be part of the problem.”
Mr Donohoe and Public Expenditure Minister Michael McGrath are currently laying the groundwork for the budget, with the Summer Economic Statement due to be published soon.
Mr Donohoe said lower borrowings, reduced debt, subsidies for the most vulnerable and less reliance on corporate taxes would guide the next budget.
He warned that high inflation – but not at “the rate we are seeing” – was likely to continue.
“There are clear signs that an economic regime change is now taking place,” he said.