IMF discussions with the authorities focused on how best to address the remaining challenges, especially the fiscal deficit, unemployment, and banks' non-performing loans.
The key objectives of Ireland’s EU-IMF supported programme are to address financial sector weaknesses and put Ireland’s economy on the path of sustainable growth, sound public finances and job creation, while protecting the poor and most vulnerable. The programme includes loans from the European Union and EU Member States amounting to €45 billion and a €22.5 billion Extended Fund Facility with the IMF. Conclusion of this review, which is subject to the approval process of both the EU and the IMF, would make available disbursements of €2.3 billion by the EFSF, €0.8 billion by the IMF, and €0.3 billion by bilateral creditors. This would bring authorised disbursements to 97.9% of the total international assistance envisaged under the programme. The next review mission is scheduled for October 2013.
Budget implementation is on track in the first half of the year. The new local property tax contributes to broadening Ireland’s tax base. Broad acceptance of the agreement on public sector pay is welcome as it will facilitate needed pay bill savings while protecting core public services. Nonetheless, it will be important to maintain careful and proactive budget management to contain spending within allocations for the remainder of the year and to ensure the annual fiscal targets are again met. Further progress towards sustainable public finances is necessary to sustain improved funding conditions. Budget 2014 should bring the high debt and deficit down in line with Ireland's commitments and continue Ireland’s track record of steady fiscal consolidation efforts. The mission urged the authorities to develop further structural reforms to enable continued consolidation to be achieved in a durable and growth-friendly manner, while protecting the most vulnerable.
To revive lending and support economic recovery financial sector repairs must progress. The immediate priority is to address banks’ high levels of impaired loans. Recent legislative and regulatory steps have strengthened the framework for resolving mortgages in arrears. Banks are now expected to accelerate durable solutions for borrowers in unsustainable positions, while restoring debt service payments in other arrears cases. Working out SMEs in arrears is also important given the critical role this sector can play in job creation. The mission welcomed the recent enactment of legislation that strengthens the supervisory powers of the central bank, while urging to bring the centralised credit register into operation as soon as possible. Good progress was made on specifying the supervisory diagnostic steps that should be undertaken to assess the quality of banks' balance sheets.
Full press release
Transcript of an IMF-conference call - Craig Beaumont, IMF Mission Chief for Ireland / Ángela Gaviria, IMF Media Relations
© International Monetary Fund
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