Press Release: IMF Completes First and Second Reviews Under Extended Arrangement with Ireland and Approves €1.58 Billion Disbursement
May 16, 2011Press Release No. 11/181
May 16, 2011
The Executive Board of the International Monetary Fund (IMF) today completed the first and second reviews of Ireland’s performance under an economic program supported by a three-year, SDR 19.5 billion (about €21.8 billion; or US$30.9 billion) arrangement under the Extended Fund Facility (EFF), or the equivalent of about 1,548 percent of Ireland’s IMF quota. The completion of the reviews enables the immediate disbursement of an amount equivalent to SDR 1.41 billion (about €1.58 billion; or US$2.24 billion), bringing total disbursements under the EFF to SDR 6.42 billion (about €7.20 billion; or US$10.19 billion).
The arrangement for Ireland was approved on December 16, 2010 (see Press Release No. 10/496). The arrangement is a part of a financing package amounting to €85 billion (about US$120 billion) from Ireland’s European partners through the European Financial Stabilization Mechanism (EFSM) and European Financial Stability Facility (EFSF), and bilateral loans from the United Kingdom, Sweden and Denmark, and Ireland’s own contributions.
The EFSM, EFSF and bilateral European lenders provide €45 billion on similar maturities as the IMF’s EFF. The Irish authorities round out the total financing package through a contribution amounting to €17.5 billion (about US$24.8 billion) from the nation’s cash reserves and liquid assets. European Central Bank liquidity support is also an essential component of the overall economic and financial program.
Ireland is making progress in overcoming the worst economic crisis in recent history. The new government’s strategy for restoring sustained growth, sound public finances, and job creation has been put forward in the context of the European Union/IMF-supported program. At the end of March the authorities announced the results of an in-depth analysis of the domestic banks, including stringent stress tests. On this basis, the government adopted a comprehensive strategy to reorganize and deleverage the domestic banks, and to strengthen their capital base. The new government has reaffirmed its commitment to the fiscal consolidation goals in the program. It recently announced a Jobs Initiative including tax and expenditure measures to stimulate employment that is consistent with these goals.
Following the Executive Board's discussion, Naoyuki Shinohara, Deputy Managing Director and Acting Chair said:
“Ireland’s economic program is off to a strong start. Resolute policy implementation by the authorities has kept the program on track during a period of political change and an unsettled external environment. The new government has taken full ownership of the goals and key elements of the European Union/IMF supported program; after only a few weeks in office, it announced comprehensive reforms and recapitalization of the domestic banks.
“These announcements are a major step towards restoring the Irish banking system to health which is crucial for economic recovery. Building upon the credibility of the well received capital needs assessment at the end of March, the government plans to implement bank recapitalization in a timely manner while containing fiscal costs.
“Rigorous management by the authorities will be required to successfully implement the comprehensive banking reform agenda. Deleveraging of domestic banks is needed to help them regain market-based funding, and medium-term availability of Eurosystem financing would support this process. To strengthen their balance sheets, banks should also work out problem loans on the basis of best international practices.
“The budget is on track for the ambitious 2011 fiscal adjustment targets, and the new government has committed to medium-term fiscal consolidation in line with the program. Consistent with this commitment, the recently announced Jobs Initiative is fiscally neutral while supporting the priority of job creation.
“Although the external environment continues to be challenging, the authorities are committed to sustained strong program implementation. Supporting these efforts with a more comprehensive European plan would help overcome market doubts, regain market access, reduce the threat of spillovers, and bring about a recovery of the Irish economy.”