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Ireland to repay IMF loans early thanks to recovery

28 November 2014, 15:22 CET
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(DUBLIN) - Ireland will repay early 9.0 billion euros ($11.22 billion) of its International Monetary Fund bailout loans by the end of the year on the back of a solid recovery, the finance ministry said Friday.

The repayments represent roughly 40 percent of the original 22.5 billion euros in loans received from the IMF when Ireland entered an EU-IMF bailout in late 2010.

The amounts had been due to be returned by July 2018.

"This transaction alone will save 750-million-euros over the lifetime of the IMF loans and further enhances the sustainability of our national debt," Finance Minister Michael Noonan said.

Dublin required approval from the European Union and its bilateral loan partners -- Sweden, Denmark and Britain -- to proceed with the plan.

"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," he added.

Noonan plans for a similar repayment next year, resulting in total interest savings of 1.5-billion-euros over the lifetime of the loans.

Analysts hailed the move.

"We're swapping more expensive debt for cheaper debt which we sourced on the market," Stephen Kinsella, lecturer in economics at the university of Limerick told RTE radio.

Ireland's economy has performed strongly since exiting the bailout programme last December.

It is set to grow by 4.6 percent this year - the strongest rise in the EU - according to European Commission forecasts.

Ireland's strong recovery has allowed it to raise money on the debt markets significantly cheaper than the 5 percent rates attached to the IMF loans.

On Friday, Irish 10-year bonds were trading at a yield, or rate of return to investors of under 1.4 percent on secondary debt markets, indicating the government could borrow for around this amount of interest if it sold new bonds.

In its second post-bailout review of Ireland last week, the IMF praised the Irish performance but warned risks remained.

"Growth prospects in coming years are still very uncertain. Euro area growth remains weak and subject to downside risks, potentially slowing Irish exports."


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