IMF warns that Ireland’s economic recovery is still volatile
Risks to debt sustainability remain, says IMF acting chair
International Monetary Fund first deputy managing director and acting chair David Lipton: “Strong policy implementation and timely delivery on European pledges to enhance programme sustainability remain key.” Photograph: Reuters/Yuya Shino
The International Monetary Fund (IMF) has warned that Ireland’s economic recovery is not yet “well established” and that risks to its debt sustainability remain.
Speaking at the disbursement of the tenth payment to Ireland from the IMF as part of the country’s €85 billion bailout package, David Lipton, first deputy managing director and acting chair of the IMF, welcomed the “steadfast policy implementation” of the Irish authorities and noted that improved market sentiment has pushed down bond yields.
However, he warned that “economic recovery is not well established and risks to debt sustainability remain”.
“Strong policy implementation and timely delivery on European pledges to enhance programme sustainability remain key.”
Mr Lipton advised that a reassessment of Ireland’s fiscal consolidation path should await budget 2014, and should “focus on safely reaching medium-term targets in a growth-friendly manner, where savings from the promissory note transaction provide an opportunity to help build buffers against shocks”.
Mr Lipton also called for “effective implementation of reforms” to strengthen employment services and address long-term unemployment.
In its commentary the IMF also noted that bad loans continue to hinder new lending in the banking sector, with just over 25 per cent of loans “non-performing and losses persist”.
“Addressing these issues is the focus of the authorities’ preparations for entry into European banking union ahead of the European stress test exercise next year,” the IMF said, referring to the launch of Europe’s Single Supervisory Mechanism next year.
The latest payment from the IMF came to almost € 1 billion, bringing total disbursements under the Extended Fund Facility (EFF) to about € 20.83 billion. This means €1.45 billion remains to be paid.
Separately, the European Financial Stability Facility also disbursed some funds to Ireland yesterday under the bailout plan. It disbursed € 1.6 billion in cash.
The loan has a maturity of 29 years, and means that Ireland has now got € 14.4 billion out of the total committed amount of €17.7 billion.