Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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It was agreed on the Order of Business to conclude Report and Final Stages within 60 minutes today. Accordingly, it is not necessary to agree any Order for Report or Final Stages; that is, the motions "That Report Stage be taken now" or "That Fifth Stage be taken now" need not be moved.

Amendments Nos. 1 and 2 are related and will be taken together.

Ossian Smyth (Dún Laoghaire, Green Party)
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I move amendment No. 1:

In page 3, line 11, after “funds;” to insert the following:

“to provide that the Minister for Finance may make a payment out of the Central Fund to the Central Bank of Ireland in respect of certain transactions;”.

As the two amendments being discussed today concern the same issue and as they have a single objective, both will be dealt with together. I have moved amendment No. 1 and later I will move amendment No. 2, which states:

In page 6, between lines 13 and 14, to insert the following:

“Payment to Central Bank in respect of certain transactions

7.(1) The Minister may make a payment out of the Central Fund or the growing produce thereof to the Central Bank of an amount not exceeding €6,600,000, being the amount that was payable to the Central Bank in respect of the State’s share of the proceeds of each of the- (a) deferred charges adjustment, and

(b) SCA-1 account, and that was transferred by the Fund to the Somalia Administered Account and the Sudan Administered Account. (2) In this section-

“deferred charges adjustment” shall be construed in accordance with Section V 2(b) of Decision No. 8348-(86/122) on “Income Position-Principles of “Burden Sharing,” Income Target for FY 1987 and FY 1988, Rate of Charge, and Rate of Remuneration”, adopted by the Executive Board of the International Monetary Fund on 25 July 1986, as amended from time to time;

“SCA-1 account” means the First Special Contingent Account established by Decision No. 8619-(87/90), adopted by the Executive Board of the International Monetary Fund on 17 June 1987;

“Somalia Administered Account” means the account established by Decision No. 16626-(19/103), adopted by the Executive Board of the International Monetary Fund on 18 December 2019;

“Sudan Administered Account” means the account established by Decision No. 17042-(21/46), adopted by the Executive Board of the International Monetary Fund on 10 May 2021.”.

I will begin by setting out the background to the amendments, their intended purpose and why they are being introduced in this Bill at this time. Shortly after the Bretton Woods Agreement (Amendment) Bill completed Committee Stage in Dáil Éireann in March 2022, the European Central Bank, ECB, made a determination on two IMF transactions in which Ireland, together with many other IMF members, participated. These transactions concerned the transfer of funds from two IMF accounts, the special contingency account, or SCA-1, and the deferred charges adjustment, to the administered accounts for Somalia and Sudan for the purpose of clearing the arrears that both countries had with the IMF. In anticipation of the ECB finding and the likelihood that corrective measures may be required, the Minister of State, Deputy Fleming, indicated on Committee Stage that an amendment to facilitate a payment from the Central Fund to the Central Bank of Ireland for IMF transactions was being considered. The amendments to be discussed here today are the result.

It is important to understand that these transactions took place in the context of the heavily indebted poor countries, HIPC, initiative. The Deputies may recall the HIPC initiative was launched by the IMF and the World Bank in 1996 to allow the international community, including multilateral creditors, to work together to lower the debt burden of the most heavily indebted poor countries and to permanently end repeated rescheduling of debts for these countries. Somalia and Sudan were deemed eligible for debt relief under the HIPC initiative in 2020 and 2021 respectively. However, as the IMF did not have sufficient internal resources to clear the arrears that Somalia and Sudan owed to the fund at that time, they instead invited member countries to forgo their portion of two accounts, the SCA-1 and the deferred charges adjustment, to fund the debt relief. This followed the model that the IMF had previously used for Liberia in 2008-09. Ireland, together with over 100 IMF members, agreed to contribute to the clearance of arrears to the IMF by consenting to forgo its share of SCA-1 and the deferred charges adjustment. In total, Ireland agreed to the transfer of €8.3 million from these two accounts, the IMF’s administered accounts for Somalia and Sudan.

Following the clearance of arrears to the IMF and other multilateral creditors, both Somalia and Sudan successfully reached the HIPC decision point which provided both countries with vital access to the grant financing necessary to meet their public finance and development needs. In the case of Somalia, on the day the country reached the HIPC decision point, the IMF executive board approved a new three-year arrangement for just over €363 million under the extended credit facility and the extended fund facility. Similarly with Sudan, the decision point was accompanied by an announcement that the IMF had approved an extended credit facility programme for approximately €2 billion. These outcomes were warmly welcomed by the two countries and the international community, given the strong signals they gave against the context of protracted conflict and economic problems in these regions.

In late 2021, a number of member states raised a query with the ECB regarding the transfer of these resources to the administered accounts for Somalia and Sudan. Upon further investigation, it transpired that both transactions may have contravened a prohibition on monetary financing under the Treaty on the Functioning of the European Union. This issue arose from the manner in which the funds for the SCA-1 and deferred charges adjustment were generated and the fact that, in several member states, a portion of these resources actually belonged to the national central bank rather than the finance ministry. Without wishing to get too technical, a brief explanation may be helpful.

Both the SCA-1 and the deferred charges adjustment were established under the IMF's burden-sharing mechanism, which raises funds by marginally increasing the rate of charge paid by countries which owe money to the IMF and reducing the rate of remuneration paid to creditor members. The Central Bank of Ireland, as a custodian of Ireland's SDR, or special drawing rights, which are held as part of the country's national reserves, receives the interest payments made by the IMF on Ireland's quota. As such, the portion of the SCA-1 and deferred charges adjustment generated from the reduced rate of remuneration was technically owed to the Central Bank rather than to the Exchequer. In April 2022, the ECB made its final determination, including that the financial donations provided by several national central banks via the IMF for debt relief from Somalia and Sudan were not compatible with a prohibition on monetary financing. The ECB also instructed the member states concerned to take corrective measures and, in Ireland's case, the breach of the prohibition on monetary financing had to be rectified by the restoration of these amounts to the Central Bank by the Exchequer.

Amendment No. 2 introduces a new section to the Bill which provides the legal mechanism for this corrective measure, a once-off payment of €6.6 million from the Central Fund to the Central Bank of Ireland. This sum represents the Central Bank's share of IMF resources that were transferred to the administered account for Somalia in 2020 and for Sudan in 2021, namely, €876,071 and then €5,676,032.

Following close consultation with the Attorney General's office, the amendments being discussed were drafted to provide the legal mechanism for the Minister for Finance to make this once-off payment of €6.6 million from the Central Fund to the Central Bank of Ireland. These amendments will restore the Central Bank's share of the IMF's SCA-1 and deferred charges adjustments, thereby satisfying the ECB's requirement for corrective action.

While it is regrettable that we should find ourselves on the wrong side of an ECB ruling in any instance, I would like to think Deputies understand and appreciate the motivation for the actions that have led us to this situation, that is, to provide much-needed debt relief to HIPCs at a critical time in their histories. Ireland, along with more than 100 member countries, was willing and able to work with the IMF to help Somalia and Sudan to address their significant debt burdens. Legislative measures are now required in this Bill to remedy the situation. The amendments we are considering provide the necessary legislative basis for a once-off payment from the Central Fund to the Central Bank in respect of a sum of up to €6.6 million. This sum represents the Central Bank's share of resources in the IMF's SCA-1 and deferred charges adjustments, which were transferred to the administered accounts for Somalia and Sudan.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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We are dealing with the recommital of amendments Nos. 1 and 2. Although there is a 60-minute limit on our period for taking the Bill, Members have unlimited time to speak and they can speak as frequently as they want. If they are as confused as I am, they will not be speaking an awful lot, I am afraid. I call Deputy O'Reilly.

Louise O'Reilly (Dublin Fingal, Sinn Fein)
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I am dealing with this on behalf of my colleague, an Teachta Doherty.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Deputy O'Reilly is lucky.

Louise O'Reilly (Dublin Fingal, Sinn Fein)
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I rather think my colleague is the lucky one since I am here and he is elsewhere, but we will talk about that another day. I will speak to the amendments and the Bill generally.

Amendment No. 1 appears to be a technical amendment clarifying that given payments will be made to the IMF by the Central Bank, payments shall be made from the Central Fund to the Central Bank under the guarantee that underpins the arrangement.

Amendment No. 2 appears to apply to specific transactions, which I would appreciate the Minister of State taking the opportunity to clarify, even though he has to some extent. It allows the Minister for Finance to make a payment not exceeding €6.6 million. The amendment makes specific reference to the Somalia Administered Account and the Sudan Administered Account. I would appreciate if the Minister of State could outline the specific purpose of these IMF accounts.

The legislation had been well flagged before reaching the Dáil. It aims to facilitate the State's participation in the IMF's new arrangements to borrow, NAB, process and streamline procedures for contributing to IMF trust funds. The role of the IMF 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 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 NAB facility constitutes a second line of defence to supplement IMF resources to cope with an impairment of the international monetary system, with member countries and institutions lending additional resources to the IMF. In January 2021, a reform of the NAB process took effect following consents from NAB participants, almost doubling the fund for the period from 2021 to 2025. The core provision of the Bill is to allow the State to participate in the NAB facility within the IMF. 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 this decision, adopted on 16 January 2020, the State committed approximately €2.3 billion.

The Minister of State has gone through the various sections and I will not do so again. We recognise the need for Ireland to fulfil its obligations within the international community. We recognise the role of institutions such as the IMF and the World Bank in our multilateral system. For that reason, Sinn Féin supports the legislation, which will see Ireland participating in the IMF's NAB facility and thereby providing credit to the IMF in its operations.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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The Minister of State has moved the recommital of both of these amendments. I invite him to respond to the debate on them.

Ossian Smyth (Dún Laoghaire, Green Party)
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I thank the Opposition for its support for the amendments. I have no wish ever to confuse the House or speak in any way that is not clear. Sometimes, however, it is important that I put the exact wording on the record.

By way of explanation, what we are talking about here is a 1996 initiative by the World Bank and the IMF called the HIPC initiative, the purpose of which is to provide debt relief for extremely poor countries. More than 20 countries have qualified for relief under the initiative. In the case of Somalia and Sudan, Ireland had lent them money through the IMF and the idea was that we would relieve them of that debt and nullify the amounts involved. A Central Bank deposit was used to pay off the debts but the Central Bank is not allowed to spend money that should be spent by the Government. That is considered to be monetary financing, which the ECB does not allow. A technical ruling by the ECB found we should compensate the Central Bank for the sum it spent to relieve the debts of Sudan and Somalia, which is €6.6 million. There is no legal mechanism to do that without passing these amendments to the Bill. To enable everything to remain legal, avoid the possibility of monetary financing, comply with the ECB rule and help Somalia and Sudan to be relived of their debt, we are proposing these amendments. I hope that makes it clear.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Plain English is wonderful.

Ossian Smyth (Dún Laoghaire, Green Party)
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I just want to make sure I have not said the wrong thing.

Deputy O'Reilly asked about the purpose of the administration accounts for Sudan and Somalia. They were established for the purpose of clearing the arrears both countries had to the IMF. Ireland did not lend the money directly. The IMF did but Ireland has its share of the IMF fund.

Ossian Smyth (Dún Laoghaire, Green Party)
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I move amendment No. 2:

In page 6, between lines 13 and 14, to insert the following: "Payment to Central Bank in respect of certain transactions

7. (1) The Minister may make a payment out of the Central Fund or the growing produce thereof to the Central Bank of an amount not exceeding €6,600,000, being the amount that was payable to the Central Bank in respect of the State's share of the proceeds of each of the—

(a) deferred charges adjustment, and

(b) SCA-1 account,

and that was transferred by the Fund to the Somalia Administered Account and the Sudan Administered Account.

(2) In this section—

"deferred charges adjustment" shall be construed in accordance with Section V 2(b) of Decision No. 8348-(86/122) on "Income Position-Principles of “Burden Sharing," Income Target for FY 1987 and FY 1988, Rate of Charge, and Rate of Remuneration", adopted by the Executive Board of the International Monetary Fund on 25 July 1986,

as amended from time to time;

"SCA-1 account" means the First Special Contingent Account established by Decision No. 8619-(87/90), adopted by the Executive Board of the International Monetary Fund on 17 June 1987;

"Somalia Administered Account" means the account established by Decision No. 16626-(19/103), adopted by the Executive Board of the International Monetary Fund on 18 December 2019;

"Sudan Administered Account" means the account established by Decision No. 17042-(21/46), adopted by the Executive Board of the International Monetary Fund on 10 May 2021.".

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Pursuant to Standing Order 187(3), is it reported to the Dáil that the Long Title of the Bill has been amended?

Ossian Smyth (Dún Laoghaire, Green Party)
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Yes.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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That is agreed. I thank Members and the Minister of State for their wok, participation and patience.