The decision to liquidate IBRC could lead to "substantial savings" for the Government, the Fiscal Advisory Council has claimed, but it warned that the level of savings would depend on the market view of the country's creditworthiness.

The Government decided in February to liquidate State-owned IBRC to reduce the annual cost of toxic lenders. Estimates at the time placed the annual savings at around €1 billion.

However, the advisory committee said the gains from the move relative to the size of Government debt would be small.

“The gains could increase substantially if the risk spread on Irish government debt were to narrow before the new bonds are sold to the market; conversely a deterioration in risk spreads could eliminate any gains,” it said.

By the end of 2012, Government liabilities exceeded assets by €135 billion, representing 82 per cent of gross domestic product. That compares to being broadly equal prior to the crisis in 2007.

The advisory council is placing the blame for the deterioration on a combination of large budgetary deficits and exceptional payments to the banking sector.

Although the Government has substantial holdings of financial assets, including cash balances, semi-state entities and investments made in the banking sector, the value of the banking investments has been heavily written down.

The FAC also said the Government is facing potentially large “off-balance” sheet liabilities, mainly connected to the guarantees in the banking sector and pension liabilities.