WEALTH August 15, 2026 0 Comments

Why Borrowing to Save Could Be the Biggest Financial Mistake You’re Making Right Now

Ever find yourself trapped in a stuffy meeting room during a sweltering July heatwave, wondering if your brain’s just melted—or if everyone else’s has? That was me on Merrion Street, trying to wrap my head around how Ireland’s public finances supposedly looked like a financial powerhouse: billions earmarked for spending hikes, promises of generous tax cuts, yet no mention of the dizzying oddity beneath it all. Imagine walking into your bank, asking for a 10-year loan just to squirrel away the cash for some rainy day decades down the road—and expecting your banker to cheer you on. Spoiler: they wouldn’t. Yet here we are, at the national level, borrowing now to fatten a future savings pot, all while dancing around questions nobody seems to want to answer. Are we setting ourselves up for a savvy safety net or a puzzling fiscal maze? Let’s dive into the curious case of Ireland’s economic juggling act that had me questioning reality itself. LEARN MORE

It was in a relatively anonymous meeting room on Merrion Street, during the peak heat of July, that I thought I might be losing my mind — or at the very least, wondering if the uncomfortable sleep during the heatwave had impaired all of our faculties, writes Gavan Reilly.

Here was a presentation about how Ireland’s public finances were in rude health, with billions’ worth of spending increases and scope for some generous tax cuts… and no mention of the baffling fallacy underpinning it all.

Picture yourself asking your bank manager for a 10-year loan.

“What do you want the money for?” the manager might ask. “Oh,” you’ll reply, “nothing much, just stash it in a long-term savings pot and maybe draw it down in a decade or so.”

Not alone would you expect the manager to send you away without the loan, you’d expect him to give you a scolding about your unorthodox financial planning.

At a national macro level, though, that’s what Ireland is now doing: borrowing today to line the savings plan of tomorrow.

A background note might be useful here: three years ago, with no clarity on whether the corporate tax ‘windfalls’ would continue annually, Budget 2024 created two new long-term countercyclical funds — effectively, countercyclical buffers to plan for the problems of the future.

The Infrastructure, Climate and Nature Fund will receive €2bn a year until 2030, on the premise that capital spending will be pre-funded for much of the next decade even if tax revenues were to wane.

A separate Future Ireland Fund has a longer ambit: created to deal with bigger demographic changes, by law it cannot be tapped until the early 2040s and receives annual contributions equivalent to 0.8 per cent of GDP.

This year’s contribution will clock in at just under €5bn.

On an economist’s level, of course, countercyclical budgets are a good idea.

Nobody thinks the budgetary system should treat exceptional revenue as an annual norm, especially when so much of that revenue arises from intellectual property that could move on a whim.

But this system throws up two passing questions.

Firstly: should contributions to the latter fund be linked to GDP?

Civil servants are hardly shy in stressing how our outsized multinational sector makes GDP a poor indicator of true economic strength.

Using it as the basis for annual contributions to the Future Ireland Fund — and stipulating as such in law — is certainly a peculiar choice.

But more pertinently: should we still be making contributions if we have to borrow to do so?

That’s the realisation that prompted my existential self-doubts in that room on Merrion Street.

The simple effects of inflation and demographics alone will eat up about two-thirds of the state’s increased spending power next year.

Roll in a possible deal to increase public sector pay, plus any overspending in 2026 which raises next year’s baseline, and there’s nothing for new measures. (No wonder Jack Chambers is on an efficiency warpath.)

Ireland is already running structural deficits, and based on that, 2027 won’t be any different.

So how does it make any sense to go into the bond markets — when the ECB is still signalling a round of further hikes to interest rates — and borrow billions, for years at a time, simply to put the proceeds into a giant national kitty?

That kitty is managed by the NTMA, which said in its annual report last month that the Future Ireland Fund had returns of about 2.2 per cent last year — ahead of its benchmark projections.

Gavan REilly
borrowing — The ECB is still signalling a round of further hikes to interest rates

A few days later the NTMA entered the bond markets, paying 3.24 per cent on a 10-year bond. In other words, the growing cost of daily state operations has sucked up so much of our corporate windfalls that we’re now borrowing to fund our countercyclical buffer … and paying more in interest than we’re gaining through investing it.

The heatwave has passed. My confusion hasn’t. Please, make it make sense.