Irish policy-making institutions have been compared favourably to those of Portugal in a new study by the International Monetary Fund on how the two countries have implemented measures to address their respective budgetary crises.
The IMF also said that both countries’ adjustment programmes have placed the burden of adjustment on the better off.
The comparative study of the two countries, both of which are in EU-IMF bailout programmes, is contained in the IMF’s Fiscal Monitor report published today. The report analysed the budgetary positions of governments around the world.
Ireland had a “well-established institutional framework in place when the crisis hit, strengthening the country’s capacity to deliver on targets and providing firm control over local government spending”, the report said.
It went on to say that “public finance management, revenue administration and the debt management agency have been proactive, anticipating problems and implementation challenges, and recalibrating policies accordingly”.
It described the 2009 McCarthy report – known colloquially as An Bord Snip Nua – as “timely” and providing “a menu of high-quality measures which have been implemented progressively”.
“In contrast, Portugal started the fiscal consolidation process with a larger institutional gap” the report says.
The praise for Irish budgetary institutions is unusual. The Department of Finance in particular has come in for considerable criticism for both what it did and did not do in contributing to the crisis and addressing its consequences.
A European Commission report – The Public Finances in EMU 2007 – published just before the crisis found Irish budgetary institutions to be the weakest of 19 EU countries assessed.
On distributional issues, today’s IMF report says that both Irish and Portuguese administrations have been equitable in framing budgets.
“Both countries paid attention to equity considerations in order to support social cohesion,” the study said. It went on to say that in both countries “lower-earners were largely shielded, and the fiscal consolidations remained progressive cumulatively”.
This echoes the findings of research published by Ireland’s Economic and Social Research Institute, which showed that the cumulative impact of Irish budget measures introduced since 2008 has fallen most heavily on higher earners.
The report notes that the fiscal adjustment in Ireland is more heavily focused on expenditure reductions, rather than tax increases. It says this reflects experiences of “successful expenditure-based fiscal consolidation in the 1980s and 1990s”.
In Portugal the mix was initially more towards revenue increases but has tilted back towards an emphasis on spending cuts the report said.
