NTMA sees little value in repaying more Troika loans early

The National Treasury Management Agency’s chief executive Conor O’Kelly sees little value in the State repaying further international bailout loans early, as any savings would be marginal.

The NTMA completed the refinancing of €18 billion of International Monetary Fund loans in March of last year with lower-cost market borrowings to save €1.5 billion in lifetime interest payments.

Speaking to the Dáil Public Accounts Committee on Thursday, Mr O'Kelly said Ireland would only achieve "marginal" savings by seeking to refinance the remaining €4 billion of IMF loans, while "we can't borrower at any cheaper rates" than the European element of the 2010 bailout.

The rate on the remaining IMF loans “is about 0.5 per cent for an average life of over six years”, Mr O’Kelly said. Ireland’s benchmark 10-year bonds currently carry a market interest rate, or yield, of 0.496 per cent.

Troika permission

The Government would need approval from all members of the bailout troika to repay the remaining IMF loans ahead of schedule. In addition, Mr O’Kelly noted that a condition of the refinancing of the €18 billion of IMF loans was that the fund would continue to have €4 billion exposure to Ireland so that it could remain part of the post-bailout international surveillance team.

Meanwhile, Mr O’Kelly said that as NTMA refinances about €45 billion of debt due to be repaid between 2018 and 2020, Ireland’s annual interest burden may fall to about €6 billion from €7 billion last year – if market interest rates remain stable.

Last year saw the State’s interest bill fall for the first time since 2008, from €7.5 billion in 2014, as it borrowed at cheaper rates in the market, helped by the European Central Bank’s quantitative easing bond-buying programme.

However, Mr O’Kelly reiterated comments made last week that Ireland’s borrowing rates, currently at ultra-low levels because of ECB intervention, will ultimately reflect the negative impact of Brexit and other economic factors “in the medium term”.