WASHINGTON (MNI) – The following is the text of the statement from
the IMF Sunday on the agreement reached with Ireland on a 22.5 billion
euro Extended Fund Facility:

IMF Reaches Staff-level Agreement with Ireland on 22.5 Billion
Extended Fund Facility Arrangement

Mr. Dominique Strauss-Kahn, Managing Director of the International
Monetary Fund (IMF), issued the following statement today on Ireland:

“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

“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 pillars:
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

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

“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.

“A financing package of 85 billion (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; 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 Europe 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.

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