In its latest review of Ireland’s bailout programme, the fund also criticised Irish banks for “inadequate progress” in dealing with non-performing loans.
It says repossessions are low at 0.3% of total mortgage arrears in 2012, compared to 3.25% in Britain and the United States.
The IMF suggested a need to strengthen the efficiency of the repossession regime.
While acknowledging progress to date, the fund expects Ireland’s economy to grow by 1.1% this year, by 2.2% next year and by 2.7% in 2015.
However, it says if growth was to fall short of these targets and to remain a sluggish 0.5% per year, public debt would escalate to one-and-a-half times the size of the economy by 2021.
That would put the economy on what the IMF calls an “unsustainable path”.
The IMF also has called on the EU to deliver on pledges made to Ireland, including recapitalisation of Irish banks from European funds, to ensure a successful exit from the bailout programme.
It says allowing the European Stability Mechanism bailout fund to directly invest in Irish banks could play “an invaluable role” in improving the country’s prospects for recovery and making the public debt burden more sustainable.
The high unemployment rate is also a focus of IMF attention.
“If involuntary part time workers and workers only marginally attached to the labour force – two groups that registered significant increases – are also accounted for the unemployment and underemployment rate stands at a staggering 23%,” the review says.