IMF Urges Moderation For McCreevy Budget

by Jason Gorringe, Tax-News.com, London

15 August 2001

The International Monetary Fund has released a lengthy report examining the Irish economy, it was announced this week. The picture painted by the IMF was optimistic in parts, forecasting a growth rate of 7% for the year, but cautioning Finance Minister, Charlie McCreevy that he risks entering a boom-to-bust cycle if he does not present a neutral budget this year.

The authors of the report, in keeping with the thinking in the European Union at the time of the last budget, believe that Mr McCreevy should have gone for a far less expansionary budget last time round, and have recommended that public spending be held to tightly budgeted levels, with any underspending saved to offset the giveaway aspect of the budget. They also recommended greater private sector involvement in public services as a possible alternative to expansive government spending programmes.

The IMF report questioned the practice of trading tax cuts for pay moderation, and recommended that in the future, pay deals should be linked to prevailing market conditions, and the social security tax regime was also singled out for mention, despite the fact that the report's authors warned that the current economic downturn may be hard for the country to cope with given its openness and the importance of foreign direct investment.

Despite the seemingly critical tone of some sections of the report, Mr McCreevy announced earlier this week that he welcomed the IMF's 'positive assessment' of Ireland.

Recommended