IMF approves €3.2bn bailout for Ireland

The International Monetary Fund has approved the payout of another €3.2bn in loans to Ireland.

It follows the fifth review of our progress under the bailout deal, and brings the amount released so far to €16bn.

However, the IMF has warned that the challenges we face have intensified.

In a statement, the IMF said authorities here are continuing to advance wide-ranging reforms to restore the health of the financial system so it can support Ireland's recovery.

It also said that after three years of contraction, growth is estimated at around 0.5% this year.

It also comments on the major progress made in downsizing the banking system, setting up a strategy for personal insolvency, and meeting the fiscal targets for last year.

It also said that reforms of wage agreements in sectors that have been hit hard by the recession have been submitted to the Dáil.

However it has warned that the challenges Ireland is facing have intensified since our programme began, and says continued strong implementation of fiscal consolidation and reforms are critical to Ireland getting back on the markets.

Acting IMF chairman David Lipton said the Irish authorities have continued strong implementation of their programme despite deteriorating external conditions.

They also met 2011 fiscal targets with a margin and advanced structural reforms to support growth and job creation, he said.

"The Irish authorities have responded by raising the fiscal consolidation effort adopted in Budget 2012, and the budget remains on track to meet an unchanged general Government deficit target of 8.6% of GDP," said Mr Lipton.

"If growth should weaken further, the automatic stabilisers should be allowed to operate to help avoid jeopardising the fragile recovery."

The IMF programme was approved in December 2010 as part of a larger €85bn bailout, supported by the European Financial Stabilisation Mechanism, the European Financial Stability Facility, loans from Britain, Sweden and Denmark and Ireland's own contributions.

The IMF said Irish authorities had continued to advance wide-ranging reforms to restore the health of the financial system so it can support Ireland's recovery.

Major progress in downsizing the banking system has been made, with the two largest banks disposing of almost €15bn in mainly foreign assets in 2011 at better prices than anticipated.

Steps to support growth and job creation are being put in place, reforms of sectoral wage agreements have been submitted to the Dáil, and a comprehensive strategy for personal insolvency reform has been announced, including an out-of-court debt settlement mechanism which would cover mortgages and other secured debts, it added.

Mr Lipton, also first deputy managing director, said: “After three years of contraction, Ireland’s growth is estimated at almost 1% in 2011, with exports leading the current account into surplus. Ireland’s bond spreads have declined significantly in recent months, although they remain relatively high.

“At the same time, the challenges Ireland faces have intensified since the outset of the programme, with growth expected to ease to about 0.5% in 2012 owing to a slowing in trading partner activity.”

He said that to support a renewal of sound lending and domestic demand recovery, financial sector reforms must continue to rebuild long-term viability of the banks and improve the quality of their balance sheets.

“Banks’ implementation of restructuring plans and loan portfolio resolution strategies will require vigorous supervision, while allowing them to operate on a commercial basis,” he added.

“The proposed reform of the personal insolvency framework is important to help address household debt distress over time, and it needs to be well designed and adequately resourced.

“Continued strong implementation of fiscal consolidation, and financial and structural reforms by the Irish authorities will be critical for the government to regain timely and substantial access to market funding.

“Continued strong European support remains essential to the effectiveness of the authorities’ efforts.”