22 March 2013

IMF completes ninth review under the Extended Fund Facility with Ireland and approves €0.97 billion disbursement

Ireland’s strong policy implementation has continued and positive signs are emerging. Real GDP growth was 0.9 per cent in 2012, and employment rose slightly over the year, although unemployment remains high at 14.2 per cent. Further deepening its market access, Ireland issued €5 billion of 10 year bonds at 4.15 per cent in March.

Financial sector reforms have continued to advance, but banks remain weighed down by non-performing loans at about 25 per cent of total loans. The Irish authorities have therefore established targets for banks to resolve durably distressed mortgages, with banks required to propose sustainable solutions to 50 per cent of distressed mortgage accounts by end-2013.

Mr David Lipton, First Deputy Managing Director and Acting Chair, said:

“The Irish authorities have pursued steadfast policy implementation for more than two years and positive results are emerging. Recent economic indicators suggest a nascent revival of domestic demand, Irish bond yields have fallen to pre-programme levels, and the government’s market access has deepened, as seen in the successful issuance of 10-year bonds. Nonetheless, problem loans remain high and accelerating their resolution is a key to economic recovery. The recent establishment of mortgage loan restructuring targets for banks is therefore welcome, and it will be supported by reforms announced by authorities that facilitate constructive engagement between banks and borrowers, promote the efficiency of repossession procedures as a last resort, provide banks with the right incentives through provisioning rules, and by sound implementation of the personal insolvency reform. Progress with resolution efforts for SME loans is also a priority.“

“Building on the strong budget outturn for 2012, sound budget execution remains critical in 2013, including continued vigilance on health spending and a successful introduction of the property tax. The fiscal consolidation path in coming years should be reviewed at the time of Budget 2014 to ensure that medium-term consolidation targets are achieved in a growth-friendly manner. Prospects for Ireland’s exit from official support have improved, yet continued strong policy implementation remains paramount given risks to medium-term growth and debt sustainability. Timely and forceful delivery on European pledges to improve programme sustainability, especially by breaking the vicious circle between the banks and the Irish sovereign, would go a long way toward Ireland’s durable exit from drawing on official support.”

Full press release

Draft-MoU, 12.3.13

© International Monetary Fund