WASHINGTON (Reuters) - The International Monetary Fund on Friday said it approved a $2.11 billion disbursement to help debt-stricken Ireland as part of a broader bailout package.
The lender said the Irish government has “maintained resolute implementation” of an austerity program aimed at getting its budget and banking crisis under control and urged it to continue to do so to avoid the risk of contagion.
So far, the IMF has disbursed $12.39 billion to Ireland under a bailout package also supported by the European Union through its European Financial Stability Facility and by bilateral loans from Britain, Sweden and Denmark.
The total bailout package for Ireland from all participants amounts to 85 billion euros or about $123 billion.
The Irish government has said it hopes to regain access to bond markets next year, so it can borrow money on its own and effectively regain its own sovereignty instead of relying on a bailout.
The IMF noted that the Irish government adopted a plan in March to reorganize and reduce debts of its domestic banks and said the strategy was “ahead of schedule in some areas.”
While financial market conditions appeared to be improving, there still were risks from weaker growth in key trading partners’ economies that mean Ireland must stick with a program of austerity to get its economy into better shape.
“Continued timely implementation of the program remains essential to support the ongoing recovery, limit contagion risks, and rebuild market confidence,” the IMF said.
There were concerns in markets earlier this year that Ireland might have to extend its existing EU-IMF bailout or seek a second rescue if it couldn’t successfully return to markets on its own.
On Thursday, however, Irish Finance Minister Michael Noonan said that shouldn’t be the case.
“Any country that is fulfilling its program, if it still needs funds and can’t access the markets, will get credit lines from the fund so that the question of Ireland having to reenter a second program is off the table,” Noonan told a parliamentary financial committee.
The country is on a strict austerity budget to try to get its finances back in order and Noonan cautioned that turmoil in the global economy had increased risks to recovery efforts and would likely force the government to cut its growth forecasts for next year.
Still, Noonan said he expects the economy to expand in 2011, breaking a three-year cycle of shrinking economic output, and to meet a target of cutting cut the deficit to 10 percent of total national economic output this year.
Noonan added that the government would update its growth forecasts in October and would likely have to cut its 2.5 percent growth forecast for 2012.
Reporting by Glenn Somerville and Tim Ahmann; Editing by James Dalgleish