Budget deficit rises to €9.4bn as Covid-19 spending soars

Budget deficit rises to €9.4bn as Covid-19 spending soars
Paschal Donohoe said a "considerable and unprecedented amount of uncertainty remains" in the wake of the pandemic. File photo

Ireland's public finances fell further into the red last month as Government spending related to the Covid-19 pandemic soared.

The latest exchequer returns show the Government’s budget deficit – the difference between what it spends and what it takes in in taxes – rose to €9.45 billion in August.

This compares to a deficit of just €625 million this time last year, marking a year-on-year deterioration of €8.8 billion.

The deficit was driven by a big increase in Government spending, which was €43.2 billion for the period, up 28 per cent, or €9.4 billion, on last year.


“The rise in expenditure primarily reflects increased departmental drawdown in response to the Covid-19 pandemic,” said the Department of Finance, pointing particularly to health and social protection.

Income tax, the Government’s biggest tax head, has proved remarkably resilient in the face of the crisis, generating €13.9 billion, which was only marginally (1.4 per cent) down on last year.

Commenting on the figures, the Minister for Finance Paschal Donohoe said: “Today’s Exchequer returns confirm the scale of the cost of fighting this pandemic. The Exchequer deficit to end-August reflects the unprecedented increase in public expenditure as a result of the Government’s support for our health service and the wider economy through this crisis.

“Although there are some positive developments – most notably in income tax receipts – a considerable and unprecedented amount of uncertainty remains. A deficit of this magnitude underlines the extent of the challenge we face — once the economy recovers — in placing the public finances on a sustainable trajectory,” he said.