One of the odd aspects of the election campaign so far is that despite constant references to the EU-IMF deal, nobody seems to have pointed out that even by the IMF’s own calculations, the deal does not in fact provide enough money to fund the state for three years.
I’ve been over this before in detail but here’s a quick reminder. The IMF’s report on the Irish deal projects cumulative general government deficits of €43.5 billion over the period 2011-2013. This includes a phantom €1.8 billion for interest on promissory notes that will count on the deficit in 2013 but for which cash payments are intended to be deferred. So the IMF are really projecting a cash requirement of €41.7 billion to fund deficits over the next three years. (See spreadsheet with calculations here.)
The EU-IMF programme provides €50 billion over the period 2011-2013 to fund budget deficits and other cash payments. This means that, based on the IMF’s own deficit projections, the Irish government will need to come up with an additional €17.5 billion to fund the state over the next three years and also honour comittments on bonds that it has issued.
Do we have this €17.5 billion? Unfortunately not. After €10 billion is contributed to the bank recap, the NPRF will have €4.9 billion remaining. Exchequer balances were €15.7 billion at the end of 2011. Deduct the remaining €7.5 billion for the banking package and €6 billion for paying off our remaining T-bills over January to March and we’re left with €2.2 billion.
So, by my calculations, we don’t have the €17.5 billion that the IMF figures imply are required to get us through 2011-2013; we have €7.1 billion. (Note that we would still need €11.5 billion if the government’s deficit projections came to pass, implying we’re still not funded for the three years.) Since none of the above calculations are based upon secret information, one must assume that the IMF officials overseeing the deal also believe that insufficient money has been promised to meet the stated goal of three years of funding for the Irish state.
Two questions, then, that might be worth asking over the next few weeks of the campaign:
1. Do the various parties running for election intend to request additional funds from the EU or IMF to allow the state to be funded through 2013 or are they intended to return to the bond market before the end of 2013 to fund the country?
2. Given that the €7.1 billion left in liquid funds are not sufficient to fund the country for the next three years, do those who propose spending these funds on windmills, broadband and electric cars accept that they will need to negotiate a larger borrowing package with the EU-IMF because of this spending? If not, what is their plan for funding the state through 2013?
There are many potential answers to these questions. But the questions seem worth asking.