THE GOVERNMENT expects to spend up to 12 per cent of tax revenues paying interest on borrowings this year, according to a briefing paper.

The estimate is a marked increase on the 5 per cent of tax revenues used to fund interest repayments on Government borrowing in 2007, according to the Department of Finance document.

If the exchequer deficit is “left unchecked greater than 25 per cent” by the end of 2013.

The projected tax take for this year is expected to contract to €34 billion, some €3 billion below Government estimates.

The document also revises the department’s exchequer deficit forecast from 9.5 per cent of gross domestic product (GDP), or approximately €17.5 billion this year, to 12 per cent of GDP.

According to the document advice, the European Commission has advised the Government to use the April budget to limit the deficit before introducing a “broad-based consolidation programme for 2010 – 2013” in a bid to get the deficit down to minus 3 per cent or less, as required under the terms of an agreement with the commission.

The department has forecast a 6.5 per cent economic contraction this year and says the number of people on the live register could reach 500,000 by the end of the year, if current trends are maintained.

Department officials outlined their forecasts during discussions with the Irish Exporters Association yesterday.

The association’s chief executive Michael Whelan said the department had commissioned a study on the availability of credit for businesses. He said exporters hoped the budget would contain a range of measures to assist them with restrictions on credit and pressures caused by the depreciation of sterling.

Mr Whelan said the Government was also seeking commission approval for its €100 million Enterprise Stabilisation Fund which is designed to help vulnerable companies.