Ireland could save up to €375 million a year in interest costs on our national debt if it can secure an agreement to refinance €15 billion worth of IMF loans from the Troika bailout programme, Minister for Finance Michael Noonan said today .
Speaking at the launch of the National Treasury Management Agency’s annual report, Mr Noonan said about €18 billion of the €22 billion owed by Ireland to the IMF is financed at a cost of just under 5 per cent a year. This compares with a rate of 2.3 per cent currently for Irish 10-year bonds.
He said Ireland would look to refinance about €15 billion of this, in three tranches of €5 billion over the next 18 to 24 months.
Mr Noonan said a “residue” of debt would remain with the IMF to retain the Troika arrangement alongside the European Union and the European Commission.
Commenting on the potential savings, Mr Noonan said: “Depending on the day, it would be somewhere between €20 million and €25 million for every €1 billion that we would refinance on the market.”
Mr Noonan said the IMF’s chief executive Christine Lagarde has indicated her support for a refinancing of some of its loans. However, repaying part of this funding early would trigger a clause in the bailout agreement that would require Ireland to repay its European loans at the same time.
Mr Noonan said there was no advantage to Ireland of doing this and he is hoping to secure the consent of our EU counterparts to waive this right. Ireland owes €45.7 billion to its European partners.
“There is no reason in hard cash why our partners wouldn’t agree to this. The reason is political, there’s an inconvenience for some if they have to go back to their parliaments and some might have to,” he said.
Mr Noonan said he would raise the issue again with other EU member states in September but he “would like to have the first tranche of €5 billion [RAISED] before Christmas”.
The National Treasury Management Agency has raised almost 90 per cent of its indicative funding target of €8 billion for this year, its chief executive John Corrigan said at the launch of its report.
Mr Corrigan said the agency would probably need to raise about €8 billion to €10 billion out to end of 2015 to fund the State’s coffers. This would include repaying some of the IMF debt and a refinancing some of the €8 billion that is still due on a bond that matures in 2016.
The agency will also look at reducing the State’s cash reserves by about €3 billion from a current level of around €11 billion.
The NTMA’s annual report shows that the country’s gross National Debt stood at €197.5 billion at the end of 2013. When cash and other assets are factored into consideration, the net debt was €173.9 billion, up from €137.6 billion.
The cost of servicing the State’s debt last year was €8.08 billion, up from €6.47 billion in 2012.
Separately, the National Pensions Reserve Fund, which operates under the NTMA’s umbrella, has committed €1.25 billion to investments under the Ireland Strategic Investment Fund initiative in areas such as infrastructure, venture capital and long-term financing for SMEs.
By the end of June 2014, the fund and its managers had made 73 investments in 60 Irish companies, according to the NTMA. Additional proposals are expected to lead to investments in the coming months.
The NPRF's discretionary portfolio, which excludes the State's holdings in AIB and Bank of Ireland, earned a return of 6.4 per cent in 2013 and 2.9 per cent in the first six months of this year. At the end of June, the fund's total value stood at €20.1 billion.
The discretionary portfolio was valued at €7 billion while the stakes in the banks were valued at €13.1 billion.
The NTMA also said the State Claims Agency (SCA), which carries out claims and risk management functions for the State, had secured savings of €5.6 million or 54 per cent on tribunal-related legal fees.
The NTMA said 102 tribunal-related legal expense claims have been resolved by the unit since it became operational in February 2013. An additional 38 claims are currently being managed by the SCA.
The total number of claims under the SCA’s remit at the end of last year was 6,188. This estimated liability on all active claims was €1.2 billion, of which clinical claims represented 85 per cent of the total.
