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IMF gives Ireland green light on next funding round

September 06, 2012

WASHINGTON, Sept 6 — Ireland was able to successfully meet all mid-year performance targets under its US$30 billion (RM90 billion) IMF bailout program despite economic headwinds, the International Monetary Fund said yesterday, clearing the way for the next disbursement of funds.

“Irish authorities maintain strong ownership and implementation of their adjustment program,” David Lipton, the IMF's first deputy managing director, said in a statement, though he cautioned that Ireland's recovery remained fragile.

The green light, delivered after the seventh review of Dublin's loan program with the IMF, means Ireland will receive another US$1.15 billion (RM3.4 billion) from the Washington-based lender, bringing its total funds received from the IMF to US$24 billion.

The IMF and the European Union gave Ireland a 85 billion euro (RM331.5 billion) rescue loan in 2010 to contain its financial crisis.

To meet the terms of the agreement, Dublin is now wading through an unprecedented eight-year austerity drive of tax hikes and spending cuts to reduce a budget deficit that at 9 per cent of gross domestic product was the among the biggest in the European Union last year. Dublin needs to reduce its deficit to 8.6 per cent of GDP by the end of this year and to 7.5 per cent of GDP in 2013.

The IMF said this year's target was achievable given the country's performance so far. Ireland, however, needs to continue to reform its financial sector to bring the economy back to health, said Lipton, the IMF's No. 2 official.

“The economic recovery is tentative and unemployment unacceptably high. Putting the financial sector into a position to support the recovery will require continuing efforts to return banks to profitability,” he said in a statement.

The IMF has said weaning banks off the costly bailout is key to returning the country to market funding in 2013.

Ireland returned to long-term debt markets in July for the first time since its bailout in November 2010, after European leaders decided to look at improving the terms of the country's bank rescue. Most analysts say more action is needed in order to resume sustainable long-term borrowing.

On Tuesday, Ireland said better incomes and sales tax returns meant it could meet the terms of the IMF/EU bailout this year, even though its health department pushed spending higher than planned. — Reuters 

 

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