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Banks sale proceeds will go to cut National Debt

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Minister for Finance Micael Noonan pictured with Conor O Kelly Chief Exec of the NTMA, at the  Euromoney Ireland Conference at the Westin Hotel in Dublin.

Minister for Finance Micael Noonan pictured with Conor O Kelly Chief Exec of the NTMA, at the Euromoney Ireland Conference at the Westin Hotel in Dublin.

Minister for Finance Micael Noonan pictured with Conor O Kelly Chief Exec of the NTMA, at the Euromoney Ireland Conference at the Westin Hotel in Dublin.

THE Government will use €2bn recouped from the cost of banking rescues to reduce the national debt, Michael Noonan said yesterday.

A further €3bn is set to be raised, probably by October, through a sale of AIB shares, most likely through the London Stock Exchange.

Mr Noonan said yesterday that €1.6bn of money raised in late 2013 from the sale of bonds owned by Bank of Ireland, plus €400m that is expected to be paid to the State by Permanent TSB when it sells shares this year, will go towards early repayment of the final €5.5bn of IMF loans earmarked for early repayment under a deal hammered out last year.

Up to now the National Treasury Management Agency (NTMA) has borrowed on the markets to repay the IMF loans.

The policy of using cash to fund debt repayments means the saving are even greater, but effectively ends a debate over whether to use money raised from selling bank stakes to reduce debt or to boost the economy.

"Our strategy with respect to the remaining banks is about recovering the full cost of the taxpayer's investment in these institutions, to reduce the debt and to continue to de-risk the Irish economy," Mr Noonan said.

The total saving from repaying €18.5bn of IMF loans early will be €1.5bn, more than expected when the policy was adopted last year, he said.

The Government is now looking at a public share sale of 25pc of AIB, with the share to be sold mainly on the London, rather than the Irish, Stock Exchange.

Based on the most recent valuation by the National Treasury Management Agency (NTMA) that 25pc stake is valued at close to €3bn.

While the sale is now expected by October, Mr Noonan said the time table was not tied to a political calendar.

"I don't care whether the sale starts before or after the election," he said at a conference at the Westin Hotel in Dublin organised by Euromoney.

The Minister said it is not Government policy to retain bank shareholdings in the long term.

Money put into Anglo Irish Bank and Irish Nationwide will not be recouped, he said.

Irish Independent