The Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD, has today (Thursday) announced his intention to repay early, and in full, the outstanding programme-related IMF debt (circa €4.5bn), and the bilateral loans from both Sweden, (€0.6bn), and Denmark, (€0.4bn); this amounts to a total of circa €5.5bn.
Officials from the Department of Finance and the NTMA have been examining options to improve Ireland’s debt sustainability. 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 NTMA has advised that the interest savings to the Exchequer from these early repayments are estimated to be of the order of €150m over the remaining life of the loans.
Speaking today, Minister Donohoe said: ‘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’.
“Actions taken in recent years, and the sacrifices made by our citizens, have laid the foundations for a solid and sustained economic recovery in Ireland. This has resulted in Ireland becoming the fastest growing economy in the Euro Area and our sovereign funding position now regarded as comfortable and in a healthy funding position at present. 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.”
At end-August the Exchequer had €20 billion in cash and liquid assets. The next NTMA bond auction is scheduled for Thursday 14 September and thereafter the Agency will announce its Q4 2017 funding plan on 2 October.
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. The Minister has also been in contact with the IMF Managing Director Christine Lagarde who has confirmed support for the early repayments. Ms. Lagarde has also agreed that the IMF could accompany the troika during their six month review, but in a downgraded manner, if this is required by EU lenders.
ENDS
Background Note for Editors
Under the EU-IMF Programme of Financial Assistance for Ireland, the external partners originally provided €67.5 billion to Ireland subject to compliance with the conditionality set out in the Programme. The external funding was sourced as follows:
European Union:
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- European Financial Stabilisation Mechanism (EFSM) €22.5bn
- European Financial Stability Facility (EFSF) €18.4bn[1]
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International Monetary Fund (IMF) €22.5bn
Bilateral loans:
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- UK € 3.8bn
- Sweden € 0.6bn
- Denmark € 0.4bn
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Total External Funding €67.5bn[2]
In total just over €18bn (c. 81% of the original IMF loan) was repaid early to the IMF between December 2014 and March 2015 and replaced with market-based funding at a lower interest rate.
[1] This is the total nominal loan amount. It includes a prepaid margin of approximately €530m which was deducted from the first EFSF disbursement but returned to Ireland in 2016.
[2] The net euro amount received by the Exchequer after deduction of the pre-paid margin and other adjustments was €67.5 billion.