Press Release: IMF Completes Twelfth and Final Review Under the Extended Fund Facility Arrangement for Ireland

IMF News, December 13, 2013

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Canonical URL: Press Release: IMF Completes Twelfth and Final Review Under the Extended Fund Facility Arrangement for Ireland

The Executive Board of the International Monetary Fund (IMF) completed the twelfth and final review of Ireland’s performance under a three-year arrangement under the Extended Fund Facility (EFF).
Completion of the review enables the disbursement of an amount equivalent to SDR 0.579 billion (about €0.65 billion, or about US$0.89 billion).
Total disbursements under the EFF now amount to the equivalent of SDR 19.4658 billion (about €21.81 billion, or about US$29.94 billion), or the equivalent of 1,548 percent of Ireland’s IMF quota.
The EFF arrangement for Ireland was approved on December 16, 2010, and was part of a financing package amounting to €85 billion (about US$116.68 billion), also supported by the European Financial Stabilisation Mechanism and European Financial Stability Facility, bilateral loans from Denmark, Sweden, and the United Kingdom, and Ireland’s own contributions.
The EFF arrangement will expire on December 15.

Banking sector: Ireland has pulled back from an exceptionally deep banking crisis through necessary bank support, restructuring and downsizing, and improvements in bank supervision and regulation.
Fiscal consolidation: Fiscal consolidation measures totaling some 8 percent of GDP have been implemented.
Market access and growth:
- Ireland regained access to international financial markets.
- Growth, though slower than initially projected, has exceeded the euro area average.
- A range of economic indicators suggest a recovery is emerging in the second half of 2013.
Public debt and fiscal deficit:
- Public debt is projected to reach 124 percent of GDP this year (2013), although partly reflecting Ireland’s strong cash buffer.
- The fiscal deficit is expected at about 7 percent of GDP, within the target of 7.5 percent of GDP.
Labor market:
- Unemployment is 12.5 percent in November, down from a peak of 15.1 percent in early 2012.
- Almost 60 percent of job seekers are out of work for over a year.
Nonperforming loans and mortgage arrears:
- 26.6 percent of loans are nonperforming.
- Some 17.4 percent of the total values of mortgages in primary residences are in arrears for over 90 days.

Public debt sustainability remains fragile despite the strong cash buffer.
The fiscal deficit, while within target, remains high at about 7 percent of GDP.
Heavy private sector debts and banks’ slow progress in resolving nonperforming loans weigh on domestic demand.
Unemployment remains unacceptably high at 12.5 percent (November), with long-term unemployment pervasive.

Fiscal policy:
- Continue steady fiscal consolidation to place public debt on a declining trajectory.
- Budget 2014 sets out a balanced pace of adjustment in coming years.
- To limit the drag on growth, revenue increases should focus on further broadening the tax base.
- Reforms of health, education, and social protection spending should be undertaken while protecting core public services and the most vulnerable.
Banking sector and mortgage resolution:
- Intensify efforts to resolve mortgages in arrears to help revive lending and sustain a recovery in demand.
- The recent Central Bank balance sheet assessment indicates additional provisioning is appropriate.
- Results should inform banking supervision and banks’ preparations for the Comprehensive Assessment in 2014.
- An ESM recapitalization backstop is desirable for the Comprehensive Assessment in 2014.
Labor market and credit to SMEs:
- Reducing unemployment requires improved employment services and training for jobseekers.
- Steps to promote credit to SMEs are needed, with the support of European partners welcomed.

The government decided not to request a successor program.
Following expiration of the EFF arrangement, Ireland and the IMF will initiate Post-Program Monitoring (PPM) in accordance with Fund policy to provide closer monitoring of policies of members that have substantial Fund credit outstanding following the expiration of their arrangements.

Key excerpts from Ms. Lagarde’s remarks:
- “With today’s approval of the 12th review Ireland has successfully completed its EU-IMF supported program. Steadfast policy implementation by the Irish authorities has underpinned the achievement of core program objectives: stabilizing the financial sector, significantly improving the fiscal position, and regaining market access.”
- “Renewed job creation and a range of positive indicators signal an emerging recovery. As a result, Ireland is now in a much stronger position than when its program began.”
- “Yet Ireland still faces significant economic challenges. Unemployment is too high, public debt sustainability remains fragile, and heavy private sector debts and banks’ slow progress in resolving nonperforming loans weigh on domestic demand. Continued concerted policy implementation is therefore necessary for Ireland to recover fully from the crisis.”
- “The government’s decision not to request a successor program is welcome. Ireland’s track record within its EU-IMF supported program bodes well for its success in tackling these remaining challenges and the Fund looks forward to continued constructive engagement with the Irish authorities.”

Press Release No. 13/507, December 13, 2013, IMF Communications Department