Interest bill for UK loan at €133m as due date looms
Published 14/06/2014 | 02:30
The Government has so far paid €133m in interest to the UK for a loan given as part of Ireland's bailout.
The interest was accrued as part of the £3.2bn (€4bn) loan provided by the British Treasury to Ireland in 2010, which was just a fraction of the overall €67.5bn international rescue deal.
When the bailout deal was announced, the UK, Denmark and Sweden agreed to make direct loans to Ireland instead of working through the EU/IMF bailout structure.
The loan from the UK was disbursed in eight separate instalments of £403.37m each, with the final amount drawn down last September.
The loan capital is due for repayment on various dates between 2019 and 2021.
Accumulated interest on the disbursed tranches must be paid each year on December 15 and June 15. This means another payment will fall due on Monday.
Accrued outstanding interest at the end of March was £24.56m.
Some €8.4m in interest has also been paid to Sweden, which provided a loan of €600m.
The UK government previously cut the interest rate on the loan, referring to Ireland as a special case. Under the altered arrangement, the UK charges Ireland just 0.18pc above its own borrowing costs for the loans, based on the average yield on UK government debt in the first six months before a tranche is disbursed.
The revised rate came into force in 2012.
To adjust for the higher rates previously paid, the interest payment that was due on December 15, 2012, was reduced by £7.67m.
Ireland's debt burden was made somewhat easier after finance ministers agreed last year to extend the repayment period on some of the bailout loans from Europe.
The idea behind the extension was that the debt redemption profile would be smoothed out over the next decade, and that Ireland would have to borrow less.
Ratings giant Standard & Poor's, which became the first of the three global ratings agencies to return Ireland to the A category, said on Thursday that the country would have to dramatically reduce its debt burden to return to the prized AAA notch.
In its first post-programme surveillance report, the European Commission said debt sustainability hinged "critically" on continued fiscal adjustment.