Monday 15 October 2018

Ireland to repay IMF loan early

Michael Noonan: performance is evidence of recovery
Michael Noonan: performance is evidence of recovery

Ireland is to repay almost 40% of its International Monetary Fund (IMF) loan early.

The Republic borrowed 22.5 billion euro in 2010 as part of a massive bailout package which saved the country's economy from collapse.

Finance Minister Michael Noonan said next month's early repayment would total around nine billion euro.

He added: "This transaction alone will save 750 million euros over the lifetime of the IMF loans and further enhances the sustainability of our national debt."

The November 2010 bailout by the IMF and the EU came as the financial system teetered on the brink of collapse and stemmed massive bank losses in part due to an overinflated housing market.

The Government announced the 85 billion euro IMF/EU bailout at a time of deep economic uncertainty.

Early the following year Fianna Fail, in power for the previous 14 years, was devastated at the polls as the electorate blamed the party en masse for the loss of economic sovereignty.

The loans heralded years of public spending austerity ordered by the international institutions in an effort to balance Ireland's balance sheet.

It also meant substantial interest payments by taxpayers at a time when the booming Celtic Tiger economy had hit the rails and many were losing their jobs or facing extra household charges.

Mr Noonan said next month's early repayment reduced the interest bill by 750 million euro over the lifetime of the loan.

The December repayment will discharge all scheduled IMF repayment obligations that were originally falling due from July 2015 to July 2018. Subsequent payments, planned for next year, will target later repayment dates up to January 2021, Mr Noonan said.

He added: "I expect interest savings in excess of 1.5 billion euros to be achieved from early repayment of approximately 18 billion euros to the IMF."

The actual interest savings will depend on the timing and market rate paid on bonds issued to refinance the IMF loans once completed.

The minister added: "By reducing the interest bill on the national debt we reduce the amount of tax revenues and borrowing that go towards financing the debt. This frees up resources for investment in activities that will grow the economy, create jobs and opportunities.

"This has knock-on benefits across the economy and can lower the cost of debt for businesses and families.

"It is essential that we improve our debt sustainability in order to break the boom and bust cycle of the past and the lowering of our debt-servicing costs is a significant part of achieving this."

He said the lenders had been very supportive of the Government's objective of improving Ireland's debt sustainability since he discussed this issue with them in early September.

This year's budget marked the first for seven years where the Government had room to repay workers for seven years of swingeing tax and spending cuts.

Budget 2015 heralded the long-awaited economic revival and outlined a gamble on consumer spending to cement the recent success of exporters.

Press Association

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