CREDIT RATING AGENCY Fitch has upgraded Ireland to AA on its metric that gauges the ability of countries to meet their financial commitments and repay long-term debts.

Fitch Ratings, an American credit rating agency, assigns long-term sovereign credit ratings on an alphabetic scale from ‘AAA’ to ‘D’.

Ireland’s rating has risen from AA- to AA.

It’s the country’s highest rating with Fitch since 2009 and the first upgrade since January 2022.

In explaining the upgrade, Fitch Ratings pointed to Ireland’s “very strong budget performance since 2022”, which it expects to continue.

In 2022 and 2023, there were budget surpluses over €8 billion in each year.

Fitch Ratings added that Ireland has a “prudent domestic fiscal framework designed to mitigate risks from the large and highly-concentrated windfall corporate tax revenue”.

However, it noted reliance on corporation tax as a “downside risk” and cautioned that an “OECD agreement on corporate income tax redistribution could lead to a significantly larger fall in windfall tax revenues over the medium term”.

It also said public debt in Ireland has been on a “steadily declining trend, primarily due to sustained budget surpluses”.

And while Fitch Rating points out that the “next government is uncertain”, it adds that we “do not expect a sizeable shift in macro-fiscal policy” despite possible changes to fiscal rules.

The upgrade was welcomed by Finance Minister Michael McGrath, who said it is a “welcome demonstration of the fundamental resilience of our economy”.

However, McGrath acknowledged that there are “still vulnerabilities to address” and noted that public finances “remain exposed to volatile windfall corporation tax, paid by a small handful of highly profitable multinational firms”.

He said this risk will be mitigated by the Future Ireland Fund and the Infrastructure, Climate and Nature Fund, which was noted by Fitch as one of the “key rating drivers”.

The Infrastructure, Climate and Nature Fund will seek to assist with climate change objectives and nature, water quality and biodiversity issues, while the Future Ireland Fund deals with future recognised expenditure pressures including an ageing population and climate change.

Meanwhile, the National Treasury Management Agency said the upgrade is another “positive development for Ireland”.

Dave McEvoy director of funding and debt management at the NTMA, said the upgrade is “underpinned by several key drivers including Ireland’s improved debt position, pre-funded cash balances, long average maturity and low refinancing needs”.