IMF calls for greater efforts on mortgage arrears, joblessness

The International Monetary Fund has urged the Government to step up its efforts to address mortgage arrears and high unemployment, while also calling for a greater flow of credit to SMEs. It says Ireland continues to face “significant economic challenges” in the wake of the bailout and has halved its GDP growth forecast for this year from 0.6 per cent to 0.3 per cent.

The advice comes in the Fund’s final review of the economy under the three-year rescue programme, which ended last weekend. IMF managing director, Christine Lagarde, today paid tribute to the “steadfast policy implementation” of the Government in areas including the banks and improving the public finances.

“As a result, Ireland is now in a much stronger position than when its programme began,” Ms Lagarde said.

She also identified a number of challenges facing the Republic, however, describing unemployment as “too high”and the sustainability of public debt as “fragile”. She noted that substantial debt levels in the private sector and banks’ slow progress in addressing problem loans are weighing on domestic demand.

“Continued concerted policy implementation is therefore necessary for Ireland to recover fully from the crisis,” Ms Lagarde said.

She called for an intensification of mortgage arrears resolution, saying this would assist in reviving lending and sustaining a recovery in demand. The IMF said the Government had explored pooling loss-making tracker mortgages into Government-guaranteed asset-backed securities for repurchase but noted that attracting funding from the private sector for this could be “challenging”.

In a conference call with reporters today, IMF Ireland mission chief Craig Beaumont said “there is an obvious role for European support” in the area.

Ms Lagarde also said services and training for jobseekers need to be improved.

The IMF has nonetheless welcomed the Government’s decision not to seek a precautionary credit line as the bailout closed.

“Ireland’s track record within its EU-IMF supported programme bodes well for its success in tackling these remaining challenges and the Fund looks forward to continued constructive engagement with the Irish authorities,” Ms Lagarde said.

The completion of the review means the final €650 million of the IMF’s €21.8 billion portion of the bailout can be disbursed. The authority will continue to closely monitor the Irish economy over the coming year.