Wednesday 13 December 2017

Coalition 'won't need safety net of IMF credit' to exit bailout

Fionnan Sheahan Political Editor

THE Government is being advised by investors and the bailout team that it won't need an IMF safety net when it exits the programme next year.

Preparations are under way to issue a long-term bond to fund the borrowing needed next year. The coalition intends to be fully funded for 2014 and well into 2015 before the end of this year.

In a sign of the growing confidence in Ireland's progress, the Government is being told it will not need the IMF precautionary back-up credit facility.

However, opinion is divided in government circles about whether to have the IMF's safety net funding on standby in case borrowing costs rise again to unsustainable levels.

The drawback to having the precautionary credit line available is that it has to be formally applied for to the IMF, with terms and conditions applying.

The Government will not have to decide until later in the year if it needs the facility.

"Most investors are telling us we don't need it," said a government source.

"It's too early to say. The prevailing consensus among officials and people managing the programme is that it's probably not something we need."

But the Coalition believes there are other priorities on the agenda at the moment to help the return to the market. These include:

• Redesigning the existing bailout loans.

• Getting backdated funding for the banks from the new EU bailout fund.

• Availing of a European Central Bank pledge to buy bonds.

Sensible

The Government views getting agreement on these three measures as vital to showing our debt levels are sustainable.

Over the past month, the Government has extended the repayment schedule on the Anglo Irish Bank debt by replacing the €33bn promissory notes, and agreement in principle was reached last week on pushing out the repayments of the €40bn EU bailout loans.

These developments got a positive reaction from the markets. However, there are views within the Coalition that the Government should avail of the IMF facility anyway, even if the intention is to not need it.

"It is a sensible policy to have that top-up available. By having it available, you are less likely to need it. Closing yourself off would be a bad idea," said a coalition source.

The Government is looking to test the market by issuing a 10-year bond, possibly in the coming weeks.

Issuing the long-term bond would be the first time the Government has engaged in substantial, long-term borrowing on the international markets since entering the bailout.

Finance Minister Michael Noonan last month confirmed the plans to issue the 10-year bond and said the country was on track to be able to fully fund itself via the open market by 2014.

"I think the issuance will be 10-year and that will be one of the serious tests of market conditions and of our ability to get back into the market," he said.

Irish Independent

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