CORRECTED-(OFFICIAL)-TEXT-IMF statement on Ireland bailout

(In next to last paragraph, IMF corrects name of interest
rate to “three-month Eurepo rate.”)

Nov 28 (BestGrowthStock) – Following is the text of a statement by
International Monetary Fund Managing Director Dominique
Strauss-Khan on Ireland’s bailout agreed on Sunday:

“The Irish authorities have today proposed a clear and
realistic package of policies to restore Ireland’s banking
system to health and put its public finances on a sound
footing. Immediate actions to tackle vulnerabilities in the
banks and continued strong fiscal adjustment are set in a
multi-year policy framework for sustained growth and job
creation.

“In recent years, Ireland has resolutely carried out bold
policies in a very challenging environment, and I have
confidence in its ability to implement this new program.
Supported by substantial financing, this program can underpin
market confidence and bring Ireland’s economy back on track.

“The strategy for the financial system rests on twin
illars: deleveraging and reorganization; and ample
capitalization. A fundamental downsizing and reorganization to
restore the viability of the system will commence immediately.

“At the end of this process, a smaller, more robust, and
better capitalized banking system will emerge to effectively
serve the needs of the Irish economy. The transition to this
goal will be buttressed by substantial recapitalization based
on higher capital standards and stringent stress tests and
asset valuation to accurately determine the quality of banks’
loan portfolios. In addition, structural measures — a special
resolution scheme for deposit-taking institutions and a further
strengthening of the supervisory system — will impart greater
stability.

“On the fiscal side, the program incorporates a
comprehensive National Recovery Plan that covers a period of
four years. The plan will form the basis for the 2011 budget
and also details fiscal consolidation measures through 2014.
The process of budget formation will be reformed to safeguard
these gains and bring greater sustainability to public
finances.

“The fiscal plan strikes an appropriate balance between
revenue and spending measures, and maintains Ireland’s due
regard to a social safety net.

“To restore strong sustainable growth the program includes
a strategy to remove potential structural impediments to
enhancing competitiveness and creating new employment
opportunities. It also details appropriate sectoral policies to
encourage exports and a recovery of domestic demand, thereby
supporting growth and reducing long-term unemployment.

“The financing package of 85 billion euro (about US$113
billion) will support Ireland’s effort to get its economy back
on track. Of this, the European Union and bilateral European
lenders have pledged a total of 45.0 billion (about US$60
billion). The Irish authorities have decided to contribute
17.5 billion to this effort from the nation’s cash reserves
and other liquid assets.

“The Fund’s contribution would be through a three-year SDR
19.5 billion (about 22.5 billion euros; or US$30 billion) loan,
representing about 2,320 percent of quota, under the Extended
Fund Facility (EFF). The IMF has activated its fast-track
procedures for consideration of Ireland’s funding request, and
I expect the EFF will go to the IMF Executive Board for
approval in December.

“The choice of an EFF offers Ireland a facility with a
longer repayment period, with repayments to the Fund starting
after four and a half years and ending after 10 years. The IMF
charges member countries a uniform interest rate on
nonconcessional loans, which is a floating rate based on the
SDR interest rate, which is updated weekly. (The SDR interest
rate is a weighted average of yields on three-month Treasury
bills for the United States, Japan, and the United Kingdom, and
the three-month Eurepo rate.)

“For amounts up to 300 percent of quota, the lending
interest rate is currently 1.38 percent, while the lending rate
on amounts over 300 percent of quota includes a surcharge that
is initially 200 basis points and rises to 300 basis points
after three years. At the current SDR interest rate, the
average lending interest rate at the peak level of access under
the arrangement (2,320 percent of quota) would be 3.12 percent
during the first three years, and just under 4 percent after
three years.”
(Editing by Cynthia Osterman)

CORRECTED-(OFFICIAL)-TEXT-IMF statement on Ireland bailout