Ireland Needs More Bank Measures to Ease Market Return, IMF Says

Ireland’s efforts to return to bond markets would be enhanced by new measures to deal with its banking debt, the International Monetary Fund said.

“Entering bond markets at reasonable cost and on the scale needed in 2013 and thereafter will require a substantial improvement in market conditions,” the IMF said in the report released today in Washington. “These prospects would also be improved by a deepening of financial sector reforms to address remaining issues from Ireland’s deep banking crisis, in particular the annual promissory note payments.”

Ireland’s government is seeking to restructure about 30 billion euros ($37.9 billion) of so-called promissory notes, or IOUs, used to rescue the former Anglo Irish Bank Corp., which was renamed Irish Bank Resolution Corp. The state is also seeking help to move loss-making home loans out of the banks.

Craig Beaumont, the IMF’s mission chief for Ireland, said on a call with reporters that while there is no “firm timetable” for the release of a technical paper on the Anglo Irish promissory note issue, he’d like to move the process ahead at a “reasonable pace.” He said the troika overseeing Ireland’s bailout view the issue “in very common way.”

The state needs to secure an accord to refinance the cost of bailing out Anglo Irish to “ensure the political sustainability” of more budget cuts, the IMF said.

Ireland stepped out of bond markets in September 2010 and sought an international rescue two months later, amid concern that the nation’s banking woes would push it into bankruptcy.

Debt

Debt will peak at 121 percent of gross domestic product in 2013 before declining to 111 percent by 2017, the IMF forecast. Should economic growth stagnate at 0.5 percent, debt may rise to 133 percent by 2017, the IMF said.

“Debt sustainability is fragile, particularly with respect to the medium-term growth prospects,” the IMF said.

Beaumont said the fund may review its 2013 Irish economic growth forecast of 1.9 percent in the light of the escalating euro-region debt crisis. He also said the IMF wouldn’t seek new spending cuts or tax increases this year if slowing growth hurt tax revenue.

Ireland’s October 2020 bonds, regarded as the benchmark, yielded 7.32 today, up from 6.99 percent when the IMF published its March review. The yield on the equivalent Greek security is 27 percent and on the Portuguese note it’s 10.5 percent.

To contact the editor responsible for this story: Joe Brennan in Dublin at jbrennan29@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net