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Seventh IMF review releases nearly one billion euro to Ireland

The IMF’s seventh bailout review of Ireland is complete, and with it, the release of nearly €1 billion.

Image: Itsuo Inouye/AP/Press Association Images via AP

THE IMF TODAY released details of its seventh review of Ireland’s performance, the completion of which released a further €0.92 billion.

The review states that “performance criteria and indicative targets” were met, with structural benchmarks also being met, including “a benchmark for end-September on the introduction of a fiscal responsibility bill to parliament”.

Focus then turns to Ireland’s upcoming budget, which the review says remains on track

According to the review, Ireland’s upcoming budget remains set to meet its fiscal deficit target, despite a slowdown in GDP growth when compared to 2011:

The 2012 budget remains on track for the fiscal deficit target of 8.6 per cent of GDP, despite a slowing in real GDP growth from 1.4 per cent y/y in 2011 to a projected .5 per cent in 2012 owing to weaker trading partner growth.

Tax was noted to be ahead of expectations, with Ireland’s exchequer primary deficit 0.7 per cent less of GDP that it was for the same period in 2011.

The recent controversial health cuts also get a mention:

The authorities have announced corrective measures for health spending.

The review talks of financial sector reforms, which include the personal insolvency bill:

Financial sector reforms have continued to advance, with the authorities submitting a restructuring plan for Permanent TSB to the European Commission, and they are preparing a roadmap to wean banks off the costly Eligible Liabilities Guarantee (ELG) scheme while preserving financial stability. The authorities introduced a personal insolvency bill to parliament at end June, and, at the Central Bank’s request, banks are preparing to roll out a set of loan modification options to address rising mortgage arrears.

Ireland’s return to the bond markets is marked as a “positive signal,” with the First Deputy Managing Director and Acting Chair, David Lipton, going on to say:

Half way through Ireland’s extended arrangement, the Irish authorities maintain strong ownership and implementation of their adjustment program. All program targets for end June have been met.

This is qualified somewhat by Ireland’s ‘unacceptably high’ unemployment levels.

The implementation of strategies to deal with mortgage arrears needs to continue to move ahead, so the CBI’s plans to monitor banks’ progress are welcome, and similar frameworks are needed for distressed credit to SMEs. To support these efforts, key issues for the effective operation of the new personal insolvency framework should be addressed in a timely manner.
Sound budget management has continued in 2012 and the authorities should ensure the effectiveness of measures to contain health expenditure overruns. Yet significant further consolidation is necessary, so the fiscal responsibility bill and other enhancements of the budgetary framework are welcome. The 2013 budget should focus on high quality measures that are durable and equitable, and also provide greater clarity on measures to be adopted in later years.

Read: Irish 9-year bonds fall below 6% for the first time since 2010 >

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Paul Hyland

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