IRELAND is meeting the targets set down by the IMF/EU bailout plan -- but political squabbling and problems with the banks remain major challenges.
The IMF's first review of the €85bn bailout agreement said Ireland was experiencing an "export-led recovery", but warned the banks remained "under stress".
However, the Washington-based organisation said it expected more Health Service Executive employees to come forward for its recent redundancy programme and it was surprised by the low level of capital spending in Budget 2011.
Overall, the report issued yesterday concentrates heavily on the banks and the political environment.
"The fragile political environment could create unwarranted delays," the authors said.
The IMF wants to shrink the banks in size, give them fresh cash and sell certain assets. The organisation said this would involve "difficult choices".
It recognised the Government had implemented key reforms since December, ordering stress tests of the main banks and also meeting all its budgetary targets on spending and tax.
But the IMF also recognised Irish people were still not convinced there was any recovery under way. The report said: "Unemployment remains around 13.5pc, but emigration continues, with Canada, Australia, the UK and the US as primary destinations. This indicates expectations of a short-term recovery remain soft."
The organisation said the key to success for Ireland was winning over the markets, but this required determined action and an end to political infighting present during the election.
It said the markets were worried that a change of government could cause the plan to lose momentum.
The Department of Finance has set up a unit to deal with all IMF issues and it will report on all progress from now on.
The continuing slump in the property market was making fixing the banks even more difficult, according to the IMF. Transactions were not taking place which made it hard to value the loans and assets of the banks, it added.
The organisation reviewed the recent measures in the Budget. It noted that property related tax breaks had not yet been abolished. However, a review of these is being carried out by Finance Minister Brian Lenihan.
The IMF said the Budget had "respected" the targets set down in the December agreement.
The organisation complimented Ireland on doing a thorough review of the credit union movement, with 400 credit unions scrutinised so far.
The report said the public remained concerned that bondholders were not sharing in the pain resulting from bank losses. However, as is the standard practice, the organisation did not talk about the merits or otherwise of hitting senior bondholders with losses.
The next review of the plan will take place when the new Government is in place.