IMF approves $2.23 billion in aid for Ireland

IMF approves $2.23 billion in aid for Ireland

2011-05-17 04:33:49 GMT+7 (ICT)

WASHINGTON D.C. (BNO NEWS) -- The International Monetary Fund (IMF) on Monday approved a $2.23 billion (€1.58 billion) aid for Ireland, part of a financing package agreed in December 2010.

The December 16 arrangement established a financial package amounting $120 billion (€85 billion) from Ireland's European partners through the European Financial Stabilization Mechanism (EFSM) and European Financial Stability Facility (EFSF), and bilateral loans from the United Kingdom, Sweden and Denmark.

Monday's approval came after the Executive Board of the IMF completed the first and second reviews of Ireland’s performance under a supported three-year economic program, a $30.9 billion (€21.8 billion) arrangement under Extended Fund Facility (EFF).

The approved $2.23 billion (€1.58 billion) will be immediately allocated; bringing total disbursements under the EFF to $10.19 billion (€7.20 billion). The two rounds of reviews were considered fundamental for approving the funds.

"Ireland is making progress in overcoming the worst economic crisis in recent history. The new government's strategy for restoring sustained growth, sound public finances, and job creation has been put forward in the context of the EU/IMF-supported program," said Naoyuki Shinohara, IMF Deputy Managing Director and Acting Chairman.

In November 2010, the European Commission agreed on a joint financial support package for Ireland along the ECB and the IMF. Ireland accepted the EU bailout after intense negotiations that divided the government former Prime Minister Brian Cowen who eventually retired after failing to solve the crisis.

In March, Ireland announced a reorganization of its banking system by injecting $34 billion (€24 billion) to recapitalize the severely-affected Irish banks. The Irish government reduced domestic banks to two pillar ones, based around AIB and Bank of Ireland.

"Rigorous management by the authorities will be required to successfully implement the comprehensive banking reform agenda. Deleveraging of domestic banks is needed to help them regain market-based funding, and medium-term availability of Eurosystem financing would support this process," added Shinohara.

This was the fifth attempt to recapitalize the Irish banks and brought the total cost of bailing out the sector from $65.16 billion (€46 billion) to $99.16 billion (€70 billion). The European Central Bank (ECB) supported the banks throughout the process.

"Supporting these efforts with a more comprehensive European plan would help overcome market doubts, regain market access, reduce the threat of spillovers, and bring about a recovery of the Irish economy," concluded the IMF deputy director.

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