Swedes approve IMF loan repayment

The Swedish parliament yesterday said Ireland may pay back part of its bailout loans to the International Monetary Fund early, giving the final EU approval needed for Dublin to begin repayment.

Ireland won agreement from Europe to pay the IMF before it repays aid from the European bailout funds and just needed the new Swedish government to ratify the amended terms in parliament before the deal is fully signed off.

The Government wants to replace the more expensive IMF loans with cheaper market funding to reduce the carrying cost of a national debt that ballooned to 110% of annual output this year after the economy and banking sector crashed.

The NTMA raised €3.75bn in 15-year debt earlier this month ahead of the formal ratification, taking advantage of low interest rates to sell the bonds at a record-low yield of 2.49%.

The Government has estimated that it will save around €1.5bn on debt-servicing costs over the next five years by refinancing €18.3bn of its IMF loans, and had planned to do so in three equal tranches between now and 2016.

However, a source familiar with the process said it was now likely that this would be done in two tranches rather than three and that a first repayment of €9bn to €10bn would be made after ratification from the Swedish parliament.

Ireland, which is fully pre-funded to the end of 2015 after resuming regular bond auctions this year, has also built up substantial cash buffers, which it plans to reduce and which will be used to cover the remainder of the refinancing, the source said.

The Department of Finance said, in response, last night that it would now await final approval from the Swedish authorities before setting out the next steps in the early repayment process.

“The Swedish Parliament’s has agreed to the waiver for Ireland’s proposed repayment of a portion of its IMF loan.

“I understand that the necessary written confirmations by the Swedish authorities will be provided tomorrow,” a spokesperson for Finance Minister Michael Noonan said yesterday.

Ireland owes the IMF a total of €22.5bn, for its part in the country’s controversial bailout programme (which also included the ECB and European Commission) from 2010 to the end of last year.

The permission from Sweden, delayed due to elections there, was necessary as that country provided €600m worth of bilateral loans to Ireland, as part of the overall €67.5bn bailout.

Reuters (with additional reporting by Irish Examiner reporters)