DUBLIN, Sept 7 The International Monetary
Fund cut its growth forecasts for Ireland on Wednesday due to a
worsening outlook for global growth and urged the government to
target five billion euros in asset sales up from the two billion
euros currently earmarked.
In its latest staff report on Ireland, the IMF also said
Euro zone leaders should consider additional changes to their
temporary rescue fund to help Ireland regain market access.
Ireland's borrowing costs have fallen sharply since European
leaders agreed in late July to cut the cost of its 85 billion
euros bailout package but the IMF warned that the risks to
Dublin returning to debt markets remained significant.
"Notwithstanding the government's determination to implement
the program, Ireland's prospects are dependant on the success of
broader efforts to restore financial stability across the euro
area," the IMF said in its report.
The Washington-based organisation said euro zone leaders
should swiftly implement changes already agreed to the bloc's
rescue fund, the EFSF, including the ability to provide
precautionary financing, and consider options for additional
"It would therefore be valuable for the EFSF to have
additional flexibility in a form that would help overcome these
hurdles to Ireland regaining market access at an early stage."
Ireland's government wants to make a tentative return to debt
markets next year, possibly through the issue of short-term
maturities, before making a full return in 2013, when its
current bailout is scheduled to run out.
The IMF said Dublin was on track to meet its fiscal goals
this year, was ahead of schedule in restructuring its banking
sector, but cut its growth outlook for the country for 2011 and
2012 due to the risk of weaker export growth.
"The growth outlook for key trading partners-the euro area,
the U.S. and the U.K.-has worsened substantially."
The IMF's mission chief for Ireland Craig Beaumont declined
to comment on whether the IMF had also cut its growth outlook
for the United States, the UK and the euro zone.
The IMF estimates Ireland's Gross Domestic Product (GDP)
will expand by 0.4 percent this year compared to 0.6 percent in
the previous staff report in May and 1.5 percent next year
compared to 1.9 percent previously.
Factoring in the cut to growth, Beaumont said Ireland's debt
to GDP ratio to peak would peak at around 119 percent of GDP in
2013 compared to 118 percent estimated before the IMF downgraded
its growth outlook.
Beaumont said the 1 percentage point worsening in the debt
to GDP dynamics would be more than compensated for by the cut in
the cost of Ireland's European loans.
The IMF has estimated that cut would reduce interest payments
for Ireland by about three percent of GDP cumulatively over
The IMF also said Ireland would need a robust legal
framework if the government was to try and impose losses on
senior bonds with a value of 3.5 billion euros in shuttered
lenders Anglo Irish Bank and Irish Nationwide
Building Society .
The ECB is opposed to such burden-sharing for fear of the
contagion risk and Dublin has said it would not move against the
bondholders without the approval of Frankfurt.
(Reporting by Carmel Crimmins)