Róisín Shortall (Dublin North West, Social Democrats) | Oireachtas source

I am happy to contribute to the debate on this Bill and to tentatively welcome some of the provisions. I would, however, like to raise a few issues. Perhaps the Minister of State could respond to some of my questions in his wrap-up or at a later date.

Despite my strong reservations about the IMF and some of the activities it has engaged in and continues to engage in, I state my support for the trusts referred to in the Bill and the intentions behind them. The catastrophe containment and relief trust allows the IMF to provide grants for debt relief to the poorest and most vulnerable countries hit by catastrophic natural disasters or public health disasters. That relief on debt service payments frees up resources to meet exceptional needs created by the disaster, as well as for containment and recovery as might be necessary. The poverty reduction and growth trust, then, gives low-income countries concessional financial support to help them achieve, maintain or restore a stable economy that is consistent with poverty reduction and sustainable growth. That concessional support through the poverty reduction and growth trust is currently interest free.

While the IMF undoubtedly has its problems, these are eminently worthy causes. I wonder, therefore, whether the limits allowed for in sections 5, 6 and 8 are too low? What we are talking about here are Ireland’s contributions, which are not made on any kind of regular basis, to programmes that give debt relief to poor and vulnerable countries via grants and cheap loans. Yet the grants from Ireland to the catastrophe containment and relief trust are limited at €50 million, a paltry enough sum. Contributions to the poverty reduction and growth trust are limited at €75 million, and I am informed that roughly €25 million has already been contributed.

It seems likely that the IMF will be involved in some form with the refinancing of Ukraine's debt, and probably with helping to finance the rebuilding of Ukraine's infrastructure once the war with Russia concludes. It is likely that other countries affected by war will need similar assistance, and this is before we talk about the critical need to help finance low-income countries' climate change mitigation and adaptation and transition to low carbon economies. Prescribed trust funds may be the way the IMF finances these areas, so I again wonder whether the limits defined may be much too low? I also note that the European Central Bank recently gave its technical opinion on the Bill and noted that: "the draft law does not currently explicitly cover exchange rate risk on moneys advanced by the Central Bank of Ireland”. Will the Minister of State give his opinion on this aspect of the Bill and whether he believes there is a need to make future alterations accordingly?

As the Minister of State is aware, the value of special drawing rights, or SDRs as they are commonly known, is based on a basket of currencies. The euro rate for SDRs was: 0.8104 in Dec 2019; 0.8485 in Dec 2020; and currently stands at approximately 0.8.

So when we talk about a potentially maximum loan of 1.9 billion SDRs, we know the euro value can change a good deal. It seemed to me when reading it that the European Central Bank technical opinion paper raises the questions of who will be responsible for managing the exchange rate risk, what mechanism will be used and, if the Central Bank is to manage the risk, how it will be compensated by the Exchequer for doing so. None of this is specified in the Bill.

All of this, however, is to assume that the manner in which the IMF awards financing is without its problems, which of course we know it is not. To assume so would be to ignore both its recent history and its current activities. The Covid-19 pandemic has dealt a huge blow to every country and many governments have struggled to meet the urgent needs of their populations during the crisis. The IMF has stepped in to offer extra support to a large number of countries during the pandemic but at what price does this support come?

If we want to gain an understanding of the policy direction that the IMF intends to take in the aftermath of the unprecedented crisis that is Covid-19, we only need to look at the Oxfam briefing paper from last August entitled Adding Fuel to the Fire. According to the report, as of last March, 85% of the 107 Covid-19 loans negotiated between the IMF and 85 different governments indicated plans to undertake fiscal consolidation, that is, austerity, once the health crisis abates. This trend is clearly observable in the publicly available loan documents and we have not heard anything about that from our Government or the Minister for Finance.

The IMF's initial advice to governments was to spend as much as required to mitigate the severe impacts of the Covid-19 crisis. Oxfam’s research finds the IMF is now encouraging countries to go down the path of austerity as the pandemic subsides. Some of the terms in the loan documents involved austerity measures beginning as early as before 2020 concluded. The IMF has historically advised countries facing high deficits and debt levels to adopt fiscal consolidation and this is despite strong criticism from civil society and academia about the dangers this poses. These dangers have been confirmed by the IMF's own research, including the landmark 2013 working paper on the distributional effects of fiscal consolidation, which showed that the austerity measures it championed have typically had profoundly negative distributional effects by raising inequality, decreasing wage income shares and increasing long-term unemployment.

The most commonly proposed austerity measures in the IMF loan documents include pay cuts and pay freezes, increases to VAT which we know is a particularly regressive tax and general public expenditure cuts. As usual, the most severe impacts are likely to be borne by the same sections of society that have been most adversely affected by the pandemic, which are women, low earners and vulnerable groups. Covid-19 has already increased inequality in countries across the world and austerity would make this worse.

A little more than four months ago, I stood here in the Chamber and questioned aspects of the Stability and Growth Pact from the point of view of the insufficient flexibility it provides when countries are faced with extenuating needs and circumstances. My concerns around the conditions attached to IMF funding are very similar. The Social Democrats and I are very worried that the conditions attached to IMF loans and grants might be such that we are giving with one hand and taking with the other, tying low-income countries into another cycle of austerity. This Bill gives me a rare opportunity to raise this important matter in the Dáil Chamber because it is not talked about enough.

The IMF has too often pursued and prioritised economic growth and macroeconomic stability above all else. Our Minister for Finance is very much inclined to take the same kind of approach. I listened to him recently at an IBEC briefing when he spoke about the headline figures for the public finances. They were all fine but he did not look below them and at the difficulties that so many of our citizens are encountering with housing in particular but also with the high cost of living and the inadequacy of so many of our public services. For decades, the IMF has influenced governments the world over through lending, technical assistance and surveillance. It has pushed them to adopt contractionary fiscal policies at the expense of other important considerations, including equality and the social well-being of their populations.

Few developed countries know better than Ireland the negative effects of being locked into a cycle of austerity by terms attached to IMF loans. Parties that implemented many of these policies are slow to accept the contention of many economists that the pro-cyclical fiscal tightening implemented across Europe in the last decade and a half likely played a significant role in prolonging recessions and increasing unemployment in many countries, including here in Ireland. It is what the evidence now suggests and, unfortunately, the Oxfam report I refer to indicates that whereas the IMF has made strides in its own research and discourse, occasionally sounding the alarm bells on inequality, it has remained insistent on recommending harmful austerity policies in the aftermath of crises.

I wonder what checks there are, if any, on how Irish money might be used within the catastrophe containment and relief trust and poverty reduction and growth trust, and whether any of the harmful conditions I refer to will be attached to that money. Have these concerns been raised by our Government at all or highlighted? My concern is that they have not, and given Ireland's recent history, we should be all too aware of those concerns. They should have been raised at the highest level in respect of potential for similar conditions being attached to this money. I would like clarification on those points.

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