IMF hails Republic over its budget cuts
The Republic's bailout lenders yesterday heaped praise on the Irish government's attempts to rein in its finances but acknowledged its hard work is being overshadowed by a bigger European crisis.
Officials from the IMF, EU and ECB were in Dublin at the end of a quarterly review of the region's €67.5bn bailout deal and said the fiscal programme was on track.
Ajai Chopra, the head of the IMF delegation, pointed to positives in the Irish economy despite what is going on abroad.
"There are signs of growth and stability in the economy after five years of wrenching cuts," he said adding that the government has the determination to implement the reform programme.
However, he also said that one of the biggest tests of this programme will be whether unemployment figures can be reduced.
Commenting on the recent downgrade of the Republic's debt to junk status by Moody's, he said the move was related to fears of a bigger problem in Europe and Ireland should be viewed on its own merits. "We need to keep in mind that the Moody's downgrade was directly linked to the eurozone," he said.
"Rating agencies have got it wrong on the upside ... It's naturally possible they are getting it wrong on the downside by overestimating risks."
He added that had it not been for the downgrade, Irish bond spreads would be narrower meaning that the markets would view Ireland as less risky.
"If it wasn't for contagion risks we would be seeing significantly lower spreads in the case of Ireland.
Mr Chopra said the IMF, EU and ECB are also assessing whether public finance cuts are sufficient to reduce the Republic's debts in line with targets.
The government year end budget deficit target is 10% of gross domestic product (GDP), or output, while the 2014 aim is 3% although many economists believe the latter will be pushed back until later.
Earlier Irish finance minister Michael Noonan said: "I am pleased that the mission has concluded that Ireland is meeting all of the conditions and targets of our programme and we have met the fiscal targets".