Tuesday 27 June 2017

IMF may lower cost of emergency Irish loans

Similar move by EU could take months as row rages on €85bn bailout change

Emmet Oliver Deputy Business Editor

The IMF has indicated for the first time that Ireland could see the interest rate charged on the €22.5bn the organisation is giving the country reduced shortly.

Answering a question from the Irish Independent yesterday, David Hawley, senior communications adviser with the IMF, said changes at the IMF itself could see Ireland's rate falling.

The organisation is reviewing the system of quotas that make up the fund and Ireland is one of the countries likely to see its quota rising, which would lower the interest rate, Mr Hawley explained.

Bailout

The EU is also believed to be examining reducing the rate on its portion of the €85bn bailout package given to Ireland in December, but this could take several months and is meeting internal opposition in the EU.

Pressed on how much the rate -- currently at 3.1pc -- might drop by, Mr Hawley was reluctant to comment.

"It would work out as a fall, but let me stress, I cannot assign a value to that at the moment,'' he said.

The amount of financing a member can obtain and the terms for loans are based on its quota in the IMF.

The organisation is currently engaged in a major review of this system and Ireland is set to be a beneficiary. Mr Hawley said the rate was currently at 3.1pc and was based on special drawing rights (SDRs), a form of internal currency used by the IMF.

A spokesman declined yesterday to say how much Ireland's rate could fall by, simply saying there would be no further comments beyond what Mr Hawley said.

Other countries could also benefit from the review of the quota system at the IMF, but Mr Hawley said Ireland was the only country he was aware at present that could benefit. Ireland is the only western European country receiving assistance, apart from Iceland.

Funds

Various European countries are providing Ireland with up to €45bn of funds, with Ireland itself chipping in €17.5bn for the bailout fund.

The IMF has asked Ireland to hit targets over the next few months or payments could be delayed.

For example Ireland must set up an independent budget council by the end of June.

This body will have powers to intervene if borrowing gets out of hand.

Irish Independent

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