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Ireland's Recovery Firming

by Jason Gorringe,, London

21 December 2011

The International Monetary Fund (IMF) has welcomed an improvement in Ireland's fiscal position following authorities' efforts to stabilize the banking system and achieve the 3% of Gross Domestic Product (GDP) deficit target by 2015.

Approving a further disbursement of funds as part of the EUR85bn multi-partner financial assistance package agreed by the IMF and European Union member states, the IMF said Irish authorities had adopted a credible and ambitious fiscal policy to “restore confidence as part of the government’s strategy to put the economy on a path of sustainable growth, sound public finances, and job creation”.

The IMF reported that Ireland is on track to achieve its 2011 fiscal targets, and said that the recently announced 2012 Budget, which includes EUR3.8bn in spending and revenue measures, will cut the deficit to 8.6% of GDP in 2012.

Commenting on Ireland's progress under the Program, David Lipton, First Deputy Managing Director and Acting Chair of the IMF Executive Board, said:

“The Irish authorities have maintained strong program implementation despite the strained external environment. Growth turned positive in the first half of the year and Irish bond spreads have declined significantly since the summer, but Ireland faces risks from the turmoil in the euro area and the weakened growth prospects of trading partners.”

“The authorities are keeping the budget on track for a substantial consolidation this year. Through the 2012 budget and Medium-Term Fiscal Statement they have expressed their commitment that the public debt ratio will be put on a clear downward path through a balanced mix of expenditure and revenue measures.”

“After successful completion of the crucial first phase of financial sector reforms [on the banking sector], the authorities are now deepening their efforts to build the sector’s capacity to support the recovery. Key steps underway include improving provisioning and disclosure, strengthening banks’ business models and internal controls, and enhancing financial sector supervision. The authorities are also working to restructure the credit union sector, develop relationship frameworks so that state-owned banks operate on a commercial basis, and modernize the personal insolvency framework to facilitate resolution of household debt distress.”

“Continued timely implementation of fiscal, financial, and structural reforms as well as European support, are essential for the success of the Irish program".

TAGS: tax | business | Ireland | fiscal policy | banking | international financial centres (IFC) | budget | International Monetary Fund (IMF) | offshore

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