Irish Economy
IMF says Ireland can repay bailout loans early without penalty
By Michael Hennigan, Finfacts founder and editor
Aug 12, 2014 - 1:22 PM

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The International Monetary Fund (IMF) has confirmed that Ireland can pay back its bailout loans from the Fund early without having to pay a penalty.

In a letter to Michael McGrath, Fianna Fáil Finance spokesman on finance, from Craig Beaumont, the IMF mission chief for Ireland, the latter said the IMF accepted early payment of credit with no fee or charge.

He cited the recent examples of Latvia, Hungary and Iceland.

The terms of Ireland's 2010 international bailout included a loan of €22.5bn from the IMF, with a blended average interest rate of 4.99% - - which is more than twice the cost of borrowing on the markets today.

The yield on the Irish 10-year sovereign bond today is 2.20% - - the German bund rate is 1.06%; the Netherlands equivalent rate is 1.26% and Finland's is at 1.23%. Spain's rate is 2.52%.

"The IMF's confirmation that Ireland may repay its loans to the Fund early without any penalty opens up the possibility of a very significant annual saving for the State and every effort must be made now to achieve this," Michael McGrath said.

"Given the benign borrowing conditions at present, the €20bn cash stockpile held by the NTMA and the fact that we are paying almost 5% on the IMF loans, it makes perfect sense for the government to pursue this issue," he added.

Copy of letter [pdf]

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