Debt burden could grow to ‘unsustainable’ levels: IMF

Ireland’s debt burden could climb to unsustainable levels if economic growth fails to materialise over the next few years and the banks need to be recapitalised, according to the IMF in its latest review of the economy.

As it stands, debt is forecast to peak at 122%, however, if the economy was to grow at an average rate of just 0.5% over the coming years, then debt would spiral to 134% by 2018. Bank of Ireland, AIB and Permanent TSB all face stress tests later this year. If the results find that the banks need fresh capital to withstand future losses, then that could add to government debt levels.

“Were such a scenario to arise, Ireland’s ability to rely fully on the market to cover its large post-programme financing needs could easily become strained,” said the IMF.