Rose Conway-Walsh (Mayo, Sinn Fein) | Oireachtas source

I am sharing time with Deputies Andrews and Ó Murchú.

I welcome the opportunity to speak on Second Stage of the Bretton Woods Agreements (Amendment) Bill. This legislation has been well flagged and has had a long gestation before reaching the Dáil. It is to be welcomed that we now have the legislation before us for scrutiny. The aim of the Bill is to facilitate the State's participation in the International Monetary Fund's new arrangements to borrow, NAB, and streamline procedures for contributing to IMF trust funds.

Before considering in detail the provisions of the Bill I want first to reflect more broadly on the role of the IMF. The year 2019 marked the 75th anniversary of the 1944 conference in Bretton Woods, which led to the creation of the International Bank for Reconstruction and Development - now the World Bank - and the International Monetary Fund. In many respects the Bretton Woods era ended in the 1970s. Bretton Woods was a dollar order, with the American dollar the only currency that was guaranteed convertibility to gold and as the currency of most international trade. The Bretton Woods order had obvious advantages for the United States, but it also allowed European states to control capital flows from their respective countries and into the United States. For its architects, the system had a crucial role to play in halting capital flight and allowing governments to manage interest rates in pursuit of full employment.

Spurred by the oil crisis, this order was ultimately ended by the decisions of President Richard Nixon between 1971 and 1974 to abandon fixed exchange rates, adopting the floating exchange rate system and the removal of capital controls. The post-Bretton Woods era was a new world with enormous ramifications for the global economy. Public and private debt rose massively, unemployment increased and the post-war system was replaced by a neoliberal system. However, the institutions of the World Bank and the IMF survived.

The stated role of the IMF since its inception has been to promote international financial stability, exchange rate stability and monetary co-operation. It ensures confidence by making the general resources of the IMF temporarily available to members, reducing the duration and severity of balance of payments imbalances. It has not always met these objectives, instead imposing structural adjustment programmes that have led to increased inequality, poverty and social breakdown in lower-income countries.

However, its role and importance cannot be dismissed on these grounds. On the contrary, it is because of its importance that the historical programmes it has imposed have been so damaging. Its role is crucial. It includes the facilitation of international trade, promotion of employment and sustainable economic growth and the reduction of global poverty. A core responsibility is the provision of loans to member countries that are experiencing actual or potential balance of payments problems.

Resources for IMF loans to its members are provided by member countries, primarily through their payments of quotas. Multilateral and bilateral borrowing serve as a second and third line of defence, providing temporary and supplementary resources. The new arrangements to borrow, or NAB, constitutes a second line of defence to supplement IMF resources to cope with an impairment of the international monetary system. Through the NAB, member countries and institutions lend additional resources to the IMF. In January 2021, a reform of the NAB took effect following consents from NAB participants, almost doubling the size of the NAB to $521 billion for the period from 2021 to 2025. Activation of the NAB requires support from 85% of eligible participants. The core provision of this Bill is to allow the State to participate in the new arrangements to borrow facility within the IMF.

I now wish to turn to particular provisions of the Bill. Section 2 provides for the approval of Ireland’s participation in the NAB decision, whereby the Central Bank, acting in its capacity as Ireland’s fiscal agent to the fund, will be responsible for providing a loan to the IMF in the case of a call on the NAB. Under the terms of the NAB decision adopted on 16 January 2020, the State committed approximately €2.3 billion. Section 2 grants the necessary powers to the Central Bank to perform the obligations and exercise the rights arising from Ireland’s adherence to the NAB decision, namely, the provision of a loan or promissory note to the IMF in the case of a call on the NAB. Since the original NAB decision was adopted by the IMF executive board on 27 January 1997, the NAB has been renewed on eight occasions. Under future NAB decisions, the size of the credit arrangement to be provided by participants may increase, decrease or remain unchanged.

Section 3 provides that all proposed amendments to the NAB decision will be referred to the Office of the Attorney General for consideration. If the amendment to the NAB decision creates a charge on public funds, the approval of Dáil Éireann will be necessary before the Minister can consent to the new decision.

Section 4 provides for a guarantee by the Minister for Finance to the Central Bank to cover the repayment of the principal and interest on any sum advanced by the Central Bank to the IMF under the terms of the NAB decision.

Section 5 provides for the payment of grant contributions by the Minister for Finance to the IMF’s catastrophe containment and relief trust, CCRT, unless opposed by Dáil Éireann by way of resolution. Payments to the CCRT will be made from the Central Fund. The CCRT provides grants for debt relief on IMF loans to eligible low-income countries hit by catastrophic natural disasters or public health disasters. Section 5 limits total aggregate payments to the CCRT by the Minister for Finance to €50 million. The IMF also provides concessional financial support through the poverty reduction and growth trust, PRGT, tailored to low-income countries, LICs.

Section 6 provides for the payment of grant contributions by the Minister for Finance to IMF trusts or contribution-based financing mechanisms, including the CCRT and PRGT. Section 6 also provides that the Minister may make grant contributions to a “prescribed trust fund” up to a maximum aggregate total of €50 million for each individual prescribed trust fund. In addition, it imposes a collective aggregate limit of €325 million on grant contributions to all prescribed trust funds, the CCRT and the PRGT.

Ireland joined the IMF and the World Bank in 1957 as part of a process of deepening our engagement and integration with the global economy. The legislation governing Ireland’s membership of the institutions is the Bretton Woods Agreements Act 1957, which has been amended several times. As is well known, the IMF is not averse to loading the loans it issues with ideological conditions that have often stunted the economic and social progress of developing countries. Neoliberalism must be abandoned if global inequality is to be reduced and sustainable development achieved. Ireland itself has experience of this ideology and its consequences, having been subject to a programme of austerity under the troika. After long advocating policies that put the interest of private capital before those of citizens in developing countries, the IMF has shown signs in recent times of moving course, such as its response to the Covid-19 pandemic and recent criticism of the framework to deal with debt distress. Together with our call for the IMF to recognise that austerity is a recipe for inequality and not a path of sustainable development, we also recognise the need to fulfil our obligations in the international community, recognising the role of institutions such as the IMF and World Bank in the multilateral system. For that reason, I and Sinn Féin support this legislation, which will see Ireland participate in the IMF’s new arrangements to borrow, providing credit to the IMF and its operations.

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