The Central Bank of Ireland published the annual pre-budget letter from Governor Gabriel Makhlouf to the Minister for Finance ahead of Budget 2026, warning that Ireland is particularly exposed to fallout from changing geoeconomic relationships and heightened uncertainty. The letter urges domestic policymakers to use budgetary policy to build longer-term resilience by broadening the tax base amid risks to the sustainability of corporation tax receipts, addressing infrastructure gaps sustainably, and planning for the fiscal impact of long-term challenges. The Governor argues that progress will require difficult trade-offs on spending and taxation, alongside reforms to improve the efficiency of public capital delivery and crowd in private investment. He calls for the Government to commit to a credible fiscal anchor to help avoid procyclicality and boom-bust dynamics, support rigorous expenditure control (especially current spending), and enable sustainable increases in net government expenditure over time, noting that the effectiveness of EU fiscal rules in an Irish context is undermined by reliance on gross domestic product. The letter cites Central Bank staff analysis estimating that government expenditure will need to rise by 6.5 percentage points of national income (GNI*), or EUR 265bn, between 2025 and 2050 to fund higher age-related spending and additional public investment to meet housing and net zero targets; it supports planned transfers to the Future Ireland Fund and the Infrastructure, Climate and Nature Fund, while stressing that the funds are not sufficient on their own. It also highlights the need for reforms to reduce delays and costs in planning and building infrastructure and to incentivise scale, investment, and productivity improvements in the construction sector.
Central Bank of Ireland 2025-06-30
Central Bank of Ireland publishes Governor Makhlouf’s pre-budget letter calling for a credible fiscal anchor and broader tax base for Budget 2026
The Central Bank of Ireland's annual pre-budget letter from Governor Gabriel Makhlouf urges resilience against changing geoeconomic relationships by broadening the tax base and addressing infrastructure gaps. It calls for a credible fiscal anchor, rigorous expenditure control, and sustainable spending increases, noting EUR 265bn needed by 2050. The letter supports transfers to the Future Ireland Fund and the Infrastructure, Climate and Nature Fund, emphasizing reforms to improve infrastructure planning and construction productivity.