Following approval procedures in Sweden, Denmark and UK (providers of bilateral loans) and agreement from EU member states to complete the early repayment of €18 billion of IMF loans, agreement to proceed with repayment of €9 billion of these loans was secured from the EFSM on Monday this week, and from the EFSF.
Speaking after the developments this week, Finance Minister Michael Noonan announced that:
Today “Ireland will inform the IMF of its intention to repay the first tranche repayment of approximately €9 billion. To facilitate an orderly settlement, the repayment will occur on two separate dates in December 2014. This transaction alone will save €750 million over the lifetime of the IMF loans and further enhances the sustainability of our national debt”.
The December repayment will discharge all scheduled IMF principal repayment obligations that were originally falling due from July 2015 to July 2018. Subsequent repayments, planned for 2015, will target later repayment dates up to January 2021.
Outlining the benefits of the early repayment plan, Minister Noonan said:
I expect interest savings in excess of €1.5 billion to be achieved from early repayment of approximately €18billion to the IMF. The actual interest savings will depend on the timing and market rate paid on bonds issued to refinance the IMF loans once completed. By reducing the interest bill on the national debt we reduce the amount of tax revenues & borrowing that go towards financing the debt. This frees up resources for investment in activities that will grow the economy, create jobs and opportunities. This has knock on benefits across the economy and can lower the cost of debt for businesses and families. It is essential that we improve our debt sustainability in order to break the boom and bust cycle of the past and the lowering of our debt servicing costs is a significant part of achieving this. 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.