Michael Kitt (Galway East, Fianna Fail)
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332. To ask the Minister for Finance if he will support debt cancellation in situations of unsustainable and illegitimate debt instead of increased International Monetary Fund, IMF, lending as the only policy option; the nature of IMF policy conditions in sensitive economic policy areas; if he will support an end to the IMF's support of regressive taxation; and if he will make a statement on the matter. [41880/14]

Michael Noonan (Limerick City, Fine Gael)
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Ireland is recognised internationally for its contribution to the fight against global poverty and hunger and its leading role in making international aid more effective.  We have played a strong role in the development of an international consensus on the issue of debt cancellation for the least-developed countries.

The IMF has in the past supported debt cancellation programs.  I understand that the joint IMF World Bank comprehensive approach to debt reduction is designed to ensure that no poor country faces a debt burden it cannot manage.  Through its participation in the International Monetary Fund (IMF) and World Bank, Ireland is supportive of efforts to help countries suffering debt distress. For example, in 2006, Ireland demonstrated its commitment and leadership in the area of debt relief by contributing its full financial share of over €116 million to the two main multilateral initiatives to address debt relief, the Heavily Indebted Poor Countries Initiative (HIPC) and the Multilateral Debt Relief Initiative, while other States opted to pay for this debt cancellation over a much longer period and in smaller instalments.

Furthermore, Ireland has pledged its share of the profits from recent IMF gold sales, totaling 12.94 million SDR (Special Drawing Rights), the asset reserve used by the IMF, which equates to some €15 million, to subsidize lending to low-income countries, which may currently borrow at zero interest from the Poverty Reduction and Growth Trust (PRGT), the IMF's concessional lending vehicle.

As more and more countries graduate from the multilateral debt relief initiatives, the question of how they can maintain their debt at sustainable levels has become more relevant.  In this regard, Ireland contributes €100,000 annually to the Debt Management and Financial Analysis System programme operated by the United Nations Conference on Trade and Development (UNCTAD) which provides software solutions and technical assistance to developing countries to manage their debt sustainably.

Debt relief to developing countries, and loans from the International Financial Institutions, are often conditional on the implementation of certain macro-economic and development policies.  The Government takes the view that interventions by the International Financial Institutions should take into account country ownership of their programmes, poverty reduction and the achievement of the Millennium Development Goals.

I welcome the ongoing process of reform within the World Bank and the IMF to ensure they can adequately meet the development challenges of a changing world.  Ireland has supported the governance reforms of recent years and shifts in quotas and voting power in favour of developing and transition countries.  These have served to increase the legitimacy and democratic representation of the International Financial Institutions.

I understand that the IMF does not generally lend to countries whose debt is considered unsustainable and that its policies require it to conduct an in-depth assessment of a country's debt sustainability before it commits to a lending program. The Fund's debt sustainability analysis also incorporates an assessment of the economic growth prospects of the country concerned.    

In relation to the policy conditionality aspects of IMF lending, I understand that as far as taxation is concerned, the Fund advocates taxation policies which are as broad-based and growth friendly as possible.    

In the wider policy context, I would draw the Deputy's attention to the recent IMF Fiscal Monitor Report which emphasizes the importance of tax reform and the potential benefits of fiscal consolidation polices that are designed to sustain and underpin economic growth. In this context structural reforms, both of the tax system and also of a more general nature, are also widely regarded as having an important role to play.