Press Release: IMF Executive Board Approves €22.5 Billion Extended Arrangement for Ireland

December 16, 2010

Press Release No. 10/496
December 16, 2010

The Executive Board of the International Monetary Fund (IMF) today approved a three-year Extended Fund Facility (EFF) arrangement for Ireland to support the authorities’ economic adjustment and financial stabilization program. The Fund arrangement amounts to SDR 19.5 billion (about €22.5 billion; or US$30.1 billion), or the equivalent of about 2,322 percent of Ireland’s IMF quota. The arrangement forms a critical part of a substantial financing package amounting to €85 billion (about US$113 billion) from Ireland’s European partners through the European Financial Stabilization Mechanism (EFSM) and European Financial Stability Facility (EFSF), and bilateral loans from the UK, Sweden and Denmark, and Ireland’s own contributions.

The EFSM, EFSF and bilateral European lenders will provide €45 billion on similar maturities as the IMF’s EFF. The Irish authorities will round out the total financing package through a contribution amounting to €17.5 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.

“The Irish authorities have designed an ambitious policy package to address the economic crisis facing the nation,” IMF Managing Director Dominique Strauss-Kahn stated. “It is a multi-year program targeting vulnerabilities in the banking system and aiming to restore prospects for growth—without which there can be no enduring solution to the crisis. The authorities designed a program with fairness in mind so that the burden of economic and financial adjustment is shared across all levels of society, with the most vulnerable groups the most protected.”

Exceptional financial assistance from the IMF and Europe will support the authorities’ efforts by providing sufficient financial resources to allow time for Ireland to restore market confidence and foster renewed growth and job creation, Mr. Strauss-Kahn noted.

The extended arrangement under the EFF for Ireland was approved under the Fund's exceptional access policy and fast-track Emergency Financing Mechanism procedures. As a result of the IMF Executive Board action, SDR 5 billion (about €5.8 billion) is immediately available to Ireland from the IMF.

Following the Executive Board’s action on Ireland, Mr. Strauss-Kahn, who also serves as Chairman of the Board, stated:

“The Irish economy faces a crisis without parallel in its recent history. The new program, building on the authorities’ recent efforts, steps up the pace and range of measures to address financial and fiscal stability concerns. A clear and realistic package of policies is set in a multi-year policy framework to restore Ireland’s banking system to health, place its public finances on a sound footing, and reclaim growth.

“The strategy for the financial system rests on twin pillars: deleveraging and reorganization; and ample capitalization. In addition, structural measures—a special resolution scheme for deposit-taking institutions and a further strengthening of the supervisory system—will enhance stability.

“The National Recovery Plan forms the basis for the 2011 budget and also details fiscal consolidation measures through 2014. The fiscal plan makes pragmatic choices, and maintains Ireland's due regard to a social safety net. The process of budget formation will be reformed to safeguard these gains.

“To restore strong, sustainable growth the program includes a strategy to remove potential structural impediments to enhancing competitiveness and creating new employment opportunities.

“A financing package of €85 billion (about US$113 billion) will support the comprehensive set of policies. Of this, the European Union and bilateral European lenders have pledged a total of €45 billion (about US$60 billion). The Irish authorities are to contribute €17.5 billion from the nation’s cash reserves and other liquid assets. The IMF contribution would be through a three-year SDR 19.5 billion (about €22.5 billion; or US$30.1 billion) loan, representing about 2,322 percent of quota, under the Extended Fund Facility (EFF). The EFF ensures a realistic repayment schedule, given the time needed to complete an orderly overhaul of the banking system and broader structural reforms”.


Recent Economic Developments

Despite the authorities’ efforts to implement bold economic policies in a difficult environment, Ireland has faced intense economic and financial pressures in recent months. At the root of its problems is a critically-weakened banking sector that has yet to be restored to health and stands at the center of a negative dynamic that dampens economic recovery while creating further significant fiscal challenges.

The authorities have taken major measures to strengthen the banking sector but vulnerabilities remain acute. The National Asset Management Agency is taking over banks’ land and property development assets; substantial capital has been injected, and sovereign guarantees have sought to reassure banks’ creditors. However, market pressures continue to pose challenges to large rollover needs, threatening banking system solvency and placing a severe burden on the sovereign’s finances. Layered on these real difficulties is the fall in domestic consumer and international investor confidence, with implications for growth and the cost of funding.

Moving early, the Irish authorities implemented sizeable fiscal consolidation over 2009–10. However, public finances were weighed down by a deep structural deficit, commitments to bank support, and weak growth. Public debt is, as a result, projected to end up close to 100 percent of GDP by end-2010. To help stabilize public debt, the authorities’ fiscal consolidation plan includes another €15 billion in consolidation measures over 2011–14, equivalent to 9 percent of GDP.

The authorities’ program aims to restore Ireland’s banking system to health and put the nation’s public finances on a sound footing, thus stimulating renewed confidence and a return to strong, sustained growth.

Program Summary

The authorities’ program focuses on the following priority areas:

• Fundamental restructuring of the banking sector will entail extensive deleveraging and reorganization. While this process will take time, it will start immediately and will move with deliberate speed. A smaller, more robust, and better-capitalized banking system will emerge to serve the needs of the Irish economy. To support the banking sector’s transition, banks will maintain higher capital adequacy standards to minimize market perceptions of weakness, and thereby achieve improved access to funding.

• The National Recovery Plan will form the basis of 2011 and subsequent budgets. The Plan strikes an appropriate balance between consolidation to achieve fiscal sustainability while mitigating adverse effects on growth and protecting the most vulnerable.

• Structural impediments to business environment that might underpin competitiveness in the years ahead, supporting growth, will be addressed under the program.

To achieve the program objective a multifaceted approach will be undertaken:

• A fundamentally restructured banking system that downsizes the banking sector (while addressing market perceptions of weak bank capital positions).

• Safeguarding the fiscal consolidation plan to lower the deficit and debt over the medium term.

• Institutional reform to improve the shock-absorbing capacity of the economy: a special resolution regime for banks, stronger supervision, and greater budgetary oversight.

• Further reforms to improve the economy’s efficiency to enhance growth potential.

• Large external financial assistance to manage the transition and reestablish much-needed policy credibility.

The stability thus generated—along with improved competitiveness and increased credit flows—would underpin a return of confidence, and, hence, brighter employment and growth prospects.


Ireland, which became of member of the IMF on August 8, 1957, has an IMF quota of SDR 838.40 million.

For additional information on the IMF and Ireland, see:


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