IMF says Irish plan 'on target'
The Government has met initial targets set out by the International Monetary Fund (IMF) under the conditions of the bailout plan agreed last year.
In an interim review of the progress of the implementation of the programme, the IMF said targets had been met despite continuing pressure on the financial system and political uncertainty.
"Fiscal performance has been in line with program targets and the approved Finance Bill will facilitate implementing the fiscal program for 2011," the review said. "Efforts are under way to address the data gaps and strengthen data quality."
The interim review was carried out when the IMF mission visited Dublin during between January 12th and 21st. The review is part of the conditions of the bailout the Government sought from the IMF and EU.
Publishing the results today, the IMF said the banks remained heavily reliant on emergency liquidity assistance, provided by central banks, as they have almost no access to market funding.
"Bank asset quality as well as real estate prices continue to deteriorate in line with expectations, and the needed provisioning is keeping bank profits in negative territory," the report said.
"Pressure from corporate deposit outflows have moderated, however, and retail deposits continue to be relatively stable."
Restoring market confidence will depend on "determined policy implementation", the review said.
Although the beginning of the process of overhauling the Irish banking system is encouraging, the report said outstanding challenges are "significant", and warned difficult choices would be required to strengthen the banking system.
The report also warned that the "fragile political" environment could create "unwarranted" delays.
The IMF said the first and second reviews of the programme will be combined and held once the new government has been formed.
Minister for Finance Brian Lenihan welcomed the findings of the report and said he agreed with the IMF’s conclusion that the programme is on track. “I would agree with the IMF’s staff assessment that while the good start of the process to overhaul the Irish banking system is encouraging, there are significant challenges ahead," he said.
Meanwhile, the Government is to postpone further capital injections for AIB, Bank of Ireland and the EBS Building Society until after the election. In a statement this afternoon the Department of Finance said the Government was taking the step to allow the election to take place on February 25th before the necessary injections are made.