Way cleared for Government to repay IMF loans early

The way has been cleared for Ireland to repay IMF loans ahead of schedule.

The news comes as the National Treasury Management Agency (NTMA) said it sold €500 million of six month Treasury Bills at a yield of 0.04 per cent on Thursday.

Minister for Finance Michael Noonan confirmed plans by the Governmen to pay back a large portion of debts early after the Swedish Cabinet gave its final approval to a vote taken in parliament on Wednesday to waive the mandatory proportional early repayment clause,

The vote follows on from similar agreements made with the UK and Denmark. It has political backing from fellow euro zone Member States.

“I welcome the Swedish Parliament’s decision to agree to the waiver for Ireland’s proposed repayment of a portion of its IMF loan and the confirmation by the Swedish Government that was provided today. We have already received confirmation of waivers from the UK and Denmark. Our EU and bilateral lenders have been very supportive of the government’s objective of improving Ireland’s debt sustainability since I discussed this issue with them in early September,” said Mr Noonan in a statement.

“Significant progress has been made on this project since agreement in principle was secured at the informal Ecofin in Milan in September to replace expensive IMF loans with cheaper, low cost market funding. There are real and tangible benefits to Ireland from this transaction, and I would like to take the opportunity to thank Sweden for their continued support for Ireland,” he added.

Ireland plans to repay approximately €18.3 billion of IMF loans ahead of schedule. It is believed the Government is likely to follow the first repayment with a bond issue in January with a view to repaying a further €9 billion-€10 billion of the IMF debt early next year. The remainder of the IMF debt would not be paid off early as the relevant rate of interest - just above 1 per cent - is lower the than current market rate.

Separately, the NTMA said its auction on Thursday drew bids that amounted to €1.875 billion, approximately 3.75 times the amount on offer.

Typically, the NTMA’s short term paper has been issued with a maturity of three months.

Earlier this month the NTMA raised €3.75 billion in 15-year bonds , the first time it has issued debt of this maturity since 2009. The debt was issued at an interest rate of 2.487 per cent, the lowest level ever for Irish 15-year bonds.