'Stick to cumulative Budget adjustment' says IMF
Fund says Ireland 'should maintain' €5.1 billion adjustment over two-year period
Craig Beaumont Ireland mission chief at the IMF. Photo: David Sleator/The Irish Times
The International Monetary Fund has said Ireland should stick to the cumulative €5.1 billion Budget adjustment agreed for the next two years and has softened its stance on how much of that consolidation should be taken in 2014.
Originally, the Government had agreed to an adjustment of €3.1 billion next year and €2 billion the following year.
The IMF had previously stated its desire that the Government stick to the €3.1 billion target for 2014. However, the Government has clearly signalled in recent days that he consolidation for next year would be lower than this figure.
Speaking today, Craig Beaumont, Ireland mission chief at the IMF, said the Government “should maintain” the cumulative €5.1 billion adjustment over the two-year period but added that there was flexibility as to how much is delivered each year.
This means that if Ireland does less than €3.1 billion this year it will have to compensate for this in 2015 by exceeding the planned €2 billion consolidation.
The IMF said the adjustments were consistent with reaching the agreed deficit target of 3 per cent of GDP by 2015.
The Washington DC-based fund also said it would be “desirable” for a direct bank recapitalisation backstop arrangement via the European Stability Mechanism to be made available during next year’s bank capital stress tests.
The fund said European support to lower banks’ market funding costs could help sustain domestic demand recovery in the medium term, protecting debt sustainability and financial market confidence.
These issues emerge from the latest staff report by the IMF following its 11th review of Ireland’s bailout, which was undertaken in July.
The IMF raise concerns about the pace of recovery at Permanent TSB, the bank that is 99.2 per cent owned by the State. It said it faces “prolonged losses” due to a lack of low cost funding.
It said filings for the local property tax indicate a 90 per cent compliance rate and a yield ot the exchequer of €250 million. It urges continued tight controls on Government spending, including “close monitoring of health spending”.
The IMF estimates a 2014 exchequer funding need of about €9 billion.