In a forthcoming report on the Irish economy, the International Monetary Fund will describe the Government's tax reforms as commendable, The Irish Times has learned. Its position puts the IMF at odds with European Commission criticisms of the last budget.
However, the report, which will not be made public until later this month, is expected to conclude that the Republic's fiscal policy for 2001 should have been neutral rather than expansionary, and it will caution the Government to control spending tightly.
The report was compiled by an IMF team which visited Ireland in May and was approved at an IMF board meeting on Wednesday. The IMF outlook for the economy is favourable, but the report is believed to identify risks to achieving a sustainable rate of growth.
One of the greatest risks is that the Government will succumb to pressures on spending. Another is that wages in the public sector will exceed levels conducive to continued rapid growth, or that industrial unrest will grow because workers feel they are not getting a fair share of the gains from growth.
The report is expected to indicate a belief that national partnership agreements have out lived their usefulness, while warning that pay norms under the Programme for Prosperity and Fairness should not be breached and pressure from groups to leapfrog over other pay increases should be resisted.
It will suggest that to promote employment, the net effect of tax adjustments and household transfers should be to increase remuneration for wage earners compared with the unemployed.
The Government's tax re forms, which the EU Commission criticised as inflationary, are judged by the IMF to be commendable, with scope for further rationalisation.
The IMF disagrees with the EU's emphasis on setting precise targets for Exchequer deficits and surpluses, and Irish officials may use the report to make the point to Brussels that it is the EU Commission, not Ireland, that is out of step on fiscal policy.
The IMF is expected to recommend a neutral or balanced fiscal stance by the Minister for Finance, Mr McCreevy, this year and next.
Another key it sees to a high rate of sustainable growth is the privatisation of utilities and mass transport, and it believes that increasing public resources to health and education should be accompanied by a study of alternative funding, including private sector services.