In its first review of the loan programme for Ireland, the International Monetary Fund has said the package agreed late last year is on target, despite what it calls the climate of political uncertainty.

The report acknowledges that while there is support for the bail out programme among the public, it says a lingering ‘perception of inequitable burden sharing persists’.

Indicators show a modest export led recovery in the economy, the IMF notes, but says the banking sector remains under stress.

The IMF says the ‘fragile political environment’ could cause delays in sorting out the banking sector.

It is clear from the IMF report that it believes the governmental and fiscal targets of the programme are in hand.

But it raises its biggest concern over the bank restructuring which it says ‘would be difficult in the best of circumstances’.

Acknowledging that we are a long way from that, the report says the banking changes are what it calls ‘major operational challenge’.

Corporations withdrew €15bn in deposits from Irish banks during 2010.

The report is the first substantial review of the IMF programme on Ireland. It is based on a visit to Ireland by an IMF team in late January.

A rescue package for Ireland was agreed in December.