Monday 20 August 2018

Ireland will look to repay IMF loans early

Finance Minister Paschal Donohoe. Photo: Tom Burke
Finance Minister Paschal Donohoe. Photo: Tom Burke

Laura Larkin and Donal O'Donovan

Ireland will seek early repayment of €5.5bn of loans taken out as part of its 2010 international bailout, which will clear the country's remaining IMF debt.

In all, Ireland will repay €5.5bn in debt which will pay off €4.5bn to the IMF and will also cover the bilateral loans from both Sweden, (€0.6bn), and Denmark, (€0.4bn).

Ireland reduced the cost of its debt through the early repayment of its more expensive IMF bailout loans in 2014 and 2015, replacing the debt with funds raised at cheaper market rates to save around €1.5bn

The NTMA previously paid back €18bn of IMF loans ahead of time, but European Union insisted that some of the IMF rescue loans be kept so that the rescue fund remained part of the Troika overseeing the Irish bailout. 

Savings on interest and improving the country's "debt sustainability programme" were among reasons cited for the latest round of early repayments.

"On the basis of NTMA advice and Departmental analysis, the Minister intends to proceed with these early repayments which have the potential to generate considerable interest savings, improve Ireland’s debt sustainability, provide liquidity benefits and increase the ECB’s purchase capacity for Irish government bonds in its quantitative easing programme," the department said.

The National Treasury Management Agency (NTMA) says interest savings could be in the order of €150m between now and 2023. The debt will be replaced with new bonds raised in the markets at a lower cost.

"Ireland greatly appreciates the support and assistance from the IMF and our European partners, which was provided at a time of great uncertainty for our country and which was key to our path to recovery.  Their support, friendship and solidarity will not be forgotten," Minister Donohoe said.

"These early repayments – in particular the early IMF repayment - will mark another very significant milestone for Ireland as we move forward, signalling the strength of our economy and sovereign funding position generally," he added.

Early repayment of the loans will require agreement from our European lenders to waive the proportionate early repayment clauses in our respective loan agreements.

Formal discussions will now begin with our EU partners to seek the necessary waivers, however IMF Managing Director Christine Lagarde has confirmed support for the early repayments.

Additonal reporting by Reuters

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