Saturday 25 October 2014

Government seeks €375m-a-year saving on IMF bailout loan

Published 29/07/2014 | 02:30

NTMA chief executive John Corrigan and Finance Minister Michael Noonan at the publication of the NTMA’s Annual Report for 2013 at Treasury Buildings.

Taxpayers could save up to €375m a year if European leaders back a deal to allow Ireland pay off just a share of the International Monetary Fund (IMF) bailout loans early, Finance Minister Michael Noonan said.

The proposed deal would see Ireland raise cash on the markets to repay €15bn of the more than €22bn that the Government owes to the IMF. It comes after the international rescue fund hiked interest rates to almost 5pc, compared to little more than 2pc on the markets.

The deal would shave €20m to €25m of interest from every €1bn refinanced, the finance minister said. On €15bn that saving would add up to between €300m and €375m a year.

The plan is "certainly worth doing," Minister Noonan said.

The scheme will require sign- off from all euro zone member states as well as the UK, Sweden and Denmark because contracts on their share of the 2010 bailout loans mean that currently the debts all have to repaid at the same time, he said.

The interest on the European loans is half that on the IMF debt, making it unattractive to pay them off early. The cost of borrowing on the markets is lower again.

"The IMF is in favour of what we want to do. I had a short discussion with Christine (Lagarde) and now we need to talk to our various partners in Europe," Mr Noonan said yesterday.

Most of his European colleagues are in favour of a deal in principle, but in some cases would require backing from national parliaments before signing off.

The head of the European Stability Fund (ESM), Klaus Regling, is supportive, Mr Noonan said.

The plan outlined by the minister does not involve repaying all of Ireland's IMF debt, because that would dismantle the Troika structure - something that could trigger resistance in Europe.

The scheme being considered would see the bulk of the IMF loans repaid early in three tranches of €5bn each. 
The first €5bn deal could 
happen as early as this year, he said.

The head of the National Treasury Management Agency (NTMA), John Corrigan, said that his agency would look at raising between €8bn and €10bn on the markets between now and the end of 2015, including money to redeem the IMF loans.

The idea has the backing of the powerful economic management council, including Taoiseach Enda Kenny, but has not yet gone to cabinet.

Lenders have yet to be asked to waive their repayment rights. The idea will be pursued at ministerial level in September, the minister said.

Irish Independent

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