Press Release: IMF Completes Third Review Under the Extended Arrangement with Ireland and Approves €1.48 Billion Disbursement
September 2, 2011Press Release No. 11/323
September 2, 2011
The Executive Board of the International Monetary Fund (IMF) today completed the third review of Ireland’s performance under an economic program supported by a three-year, SDR 19.47 billion (about €21.82 billion; or US$31.17 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 review enables the immediate disbursement of an amount equivalent to SDR 1.32 billion (about €1.48 billion; or US$2.11 billion), bringing total disbursements under the EFF to SDR 7.74 billion (about €8.68 billion; or US$12.39 billion).
The arrangement for Ireland, which was approved on December 16, 2010 (see Press Release No. 10/496) is a part of a financing package amounting to €85 billion (about US$123 billion) also supported by Ireland’s European partners through the European Financial Stabilization Mechanism and European Financial Stability Facility, and bilateral loans from the United Kingdom, Sweden and Denmark, and Ireland’s own contributions.
In the wake of credit and housing booms that were followed by the worst economic crisis in its recent history, Ireland undertook an in-depth analysis, including stringent stress tests, of its domestic banks. On this basis, the Irish authorities adopted a comprehensive strategy in March to reorganize and deleverage the domestic banks, and to strengthen their capital base. Implementation of the financial sector strategy is advancing and is ahead of schedule in some areas. The authorities are also continuing to implement a sizeable fiscal adjustment, and will publish later this year a medium-term fiscal consolidation plan for 2012 to 2015, outlining revenue and expenditure paths to bring the deficit below 3 percent of GDP in 2015. These actions are helping to restore confidence as part of the government’s strategy to put the economy on a path of sustainable growth, sound public finances, and job creation. Recent indicators are consistent with a return to positive growth in 2011.
Following the Executive Board’s discussion, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, said:
“The Irish authorities have maintained resolute implementation of their economic program. The economy is showing signs of stabilization and financial market conditions have also recently improved. Ireland’s economy, however, faces a weakening in trading partner growth, which could dampen the pace of Ireland’s recovery in the near term. Continued timely implementation of the program remains essential to support the ongoing recovery, limit contagion risks, and rebuild market confidence.
“The authorities are pushing forward financial sector reforms which are at the heart of Ireland’s response to the crisis. Bank recapitalization has been completed with welcome private investor participation. Legal restructuring of banks is ahead of schedule and their boards and management teams are being renewed. An ambitious bank deleveraging program is underway, which will gradually reduce reliance on central bank funding. Prospects for banks’ to regain market access would be enhanced by greater confidence in medium-term availability of ECB financing. Efforts to strengthen supervision and the framework for resolution of financial institutions, modernize household insolvency legislation, improve credit information, and restructure the credit union sector will further support financial sector health.
“The authorities are implementing major fiscal adjustment effectively by keeping the budget on track to meet the 2011 targets. Building a strong consensus on a medium-term fiscal plan in the coming months will reinforce confidence in achieving the substantial fiscal consolidation ahead, and reduce uncertainties around tax and spending policies for households and businesses. The recent establishment of a Fiscal Advisory Council will support sound fiscal policies on an ongoing basis.
“The strengthening of European support for Ireland announced on July 21 is welcome, and it should be put in place soon, together with the restoration of broader stability in the euro area. Saving the gains from lower interest rates and sustaining strong program implementation will ensure that Ireland is best positioned to benefit from enhanced European support.”