Bank deal 'would enhance bond market return' - IMF


Ireland's efforts to return to bond markets would be enhanced by new measures to deal with its banking debt, the International Monetary Fund has said.

In its latest report, the IMF said the State’s return to the bond markets next year would require a substantial improvement in market conditions.

"These prospects would also be improved by a deepening of financial sector reforms to address remaining issues from Ireland's deep banking crisis, in particular the annual promissory note payments," it said.

The Government has been seeking to restructure about €30 billion of promissory notes it used to rescue the former Anglo Irish Bank, now known as Irish Bank Resolution Corp.

IMF mission chief for Ireland Craig Beaumont said there was no firm timetable for the release of a technical paper on the Anglo Irish promissory note issue, but he would like to move the process ahead at a "reasonable pace".

The EU-IMF troika overseeing the bailout programme view the issue "in very common way", he said.

The State needs to secure an accord to refinance the cost of bailing out Anglo Irish to "ensure the political sustainability" of more budget cuts, the IMF said.

The fund also warned that Permanent TSB, which is moving risky home loans into an internal “bad bank”, could find it difficult to create a credible business if it maintains links with this unit.

The lender could transfer asset management unit, or so-called bad bank assets, and European Central Bank funding to IBRC, the report said.

Specific funding models will need to be looked at in future programme reviews, it said.

Ireland sought a bailout from the EU, ECB and IMF in 2010, amid concern that the
country’s troubled banking system would push it into bankruptcy.

According to IMF estimates, debt will peak at 121 per cent of gross domestic product in 2013 before declining to 111 per cent by 2017. However, if economic growth stagnated at 0.5 per cent, debt could reach 133 per cent by 2017.

"Debt sustainability is fragile, particularly with respect to the medium-term growth prospects," the IMF said.

Mr Beaumont said the fund may review its 2013 growth forecast of 1.9 per cent in the light of the escalating euro-region debt crisis. He also said the IMF wouldn't seek new spending cuts or tax increases this year if slowing growth hurt tax revenue.