IMF pushes for fire sale of state assets

THE Government is under pressure to sell off most of the state-owned companies to raise about €5 billion to offset some of the country’s debt.

The sum set out by the IMF in its latest report into how the country is dealing with the crisis, is twice what the Government has agreed to and could see the break-up and sale of 16 semi-state companies.

These include the ESB, Bord Gáis, Aer Lingus, Bord na Móna, Coillte, the National Stud, CIÉ, airports and ports and the National Lottery.

While praising the Government’s ability to raise money and cut spending, the IMF cut the growth forecast for this year to 0.4% of GDP — half the Government’s expectation.

The Department of Finance insisted there will be no fire sale of assets and said it had not agreed to any specific figure in the deal with the EU/IMF.

“The Programme for Government looks for €2bn and that is what the Government is looking at,” said a spokesman. He added the Government would wait for the optimum time to sell assets, such as its 25% stake in Aer Lingus.

But the IMF said the Government was preparing “an ambitious programme for the orderly disposal of state assets” and that the draft would be discussed with the European Commission, the European Central Bank and the IMF by the end of December.

“The [IMF] mission urged the authorities to consider a programme close to the €2bn identified in the recently concluded review of state assets and liabilities.”

Craig Beaumont, IMF mission chief to Ireland, told a press conference yesterday: “The authorities are reviewing this report and developing their own privatisation plan, to be completed by the end of the year and we will have discussions with them before this on the draft.”

They would also discuss how the money raised from the sale would be used. While generally additional sums saved must be used to pay down the country’s debt, the Government agreed with the EU/IMF that they would agree on a case by case basis if the money could be used for creating employment also.

There was no good news for under pressure mortgage holders as they ruled out debt forgiveness for home owners, saying they agreed with the Government’s moves to deal with them on a case by case basis, and looked forward to final plans by the end of March.

The IMF officials warned that while the country was well ahead of many of the targets attached to the EU/IMF €67bn bailout, the slowdown in Britain and the US would affect recovery. But the expected drop in growth should be made up for by the cut in interest rates on the EU loan. It would also mean that general government debt should be 112% of GDP in 2016 instead of 115%.

It could also delay the country’s return to the markets to raise money, due to begin in 2012, and suggest that the Government could depend on the EU’s rescue fund for additional money under new rules due to be adopted later this year.

They will also be able to take up the offers of loans from Britain, Sweden and Denmark which are currently being finalised.

But they agree with the Government’s assessment that many elements are outside their control. They say that restoring stability in the euro area in general is essential, as is preventing the kind of contagion the country has suffered over the past few months.