IFAC recommends €1.9bn of additional cuts
on 13/09/2012 12:28:21
The independent Irish Fiscal Advisory Council (IFAC) said Ireland was on course to meet its deficit targets for this year but in its third assessment of economic conditions, the agency warned that debt sustainability and credit-worthiness remained fragile.
"Weighing the risks to debt sustainability and ongoing weakness in the real economy, the Council supports an alternative fiscal stance involving a total of €1.9bn of additional adjustments in the period to 2015," it said in its latest report.
The council, chaired by Professor John McHale, NUI Galway, warned about significant spending overruns in the departments of health and social protection over the first eight months of this year.
Its review said that Ireland's debt-to-GDP ratio - what a country owes compares to what it produces - is expected to peak next year at just over 120%.
The Government is required by the bailout Troika of the IMF and European chiefs to find €3.5bn of savings next year - €1.25bn in tax and the rest in spending cuts.
IFAC has urged the Government to look at placing most of the pressure from an additional €1.9bn of savings in the budgets for 2014 and 2015.
Of its plan, the advisory group said: "This would also help to put the debt to GDP ratio on a faster downward trajectory and would provide additional insurance, albeit limited, in the effort to ensure debt sustainability."
The review was issued as Government finance and funding experts in the National Treasury Management Agency (NTMA) oversaw another step back on to the international money markets.
Finance Minister Michael Noonan said the sale was an excellent result.
"This results builds upon the NTMA's return to markets this summer and once again highlights the improvement in market sentiment towards Ireland," he said.
"It is clear that the markets are reacting very positively to the June 29 commitment and positive developments in Europe."
The NTMA completed an auction for short-term finance using Treasury Bills, selling the target amount of €500m.
The agency said it received bids worth €1.5bn, three times the amount on offer.