Friday 20 April 2018

EU blocked debt deal that could save Ireland €125m

Colm Kelpie

Colm Kelpie

Repaying Ireland's remaining IMF debt could save up to €125m, Finance Minister Michael Noonan has said.

But he added there are no plans to do so, as it would require the approval of the country's other bailout lenders.

Ireland secured agreement two years ago to repay the bulk of its costly €22.5bn worth of IMF loans, which it has now done, to make interest savings.

This amounted to just over €18bn, or 81pc of the total IMF debt, with the other bailout lenders, the European Commission, European Central Bank, UK, Sweden and Denmark, all agreeing to waive their entitlement to look for their loans to be repaid also.

However, they also insisted that some of Ireland's IMF debt should not be repaid early so that the Washington-based Fund would continue to have a role in post-programme surveillance.

Mr Noonan estimated savings of between €100m and €125m would be made if the Government could repay the remaining debt ahead of schedule, but said that because of the issues concerning the other lenders, the issue is not being pursued.

"It is important to note ... that the early repayment of any one lender cannot be treated in isolation from other lenders and market expectations for when programme loans are due to be repaid," Mr Noonan said, in response to a Dáil question.

"Consequently, any proposed early repayment of the remaining IMF funds would similarly require waivers from our lenders not to trigger automatic mandatory proportional early repayments in respect of each of the programme funding partners.

"The issue of post-programme monitoring would also have to be addressed as this was a condition of the €18.3 billion early repayment.

"If Ireland were permitted to repay the full facility earlier than scheduled, potential savings will depend on timing and prevailing market conditions for replacement debt. A current estimate of the potential savings would be in the order of €100-€125m. For the reasons outlined above, there are currently no plans to make any further early repayments, but I will keep the matter under review."

In March of last year, the NTMA completed the third and final early repayment of Ireland's IMF loan facility, thereby repaying the more expensive part of the debt.

The early repayments were intended to replace expensive debt with cheaper borrowings. The IMF was charging almost 5pc for loans, compared to little more than 2pc on the markets at that time.

The debt that has been repaid was regarded as the portion with the more onerous interest costs. The Irish Independent could not establish what the interest rate is on the remaining debt.

Ireland's total national debt stands at around €207bn. NTMA boss Conor O'Kelly has said the interest on that debt pile is costing each worker in the State €3,400 in tax each year.

Irish Independent

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