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Friday 1 December 2023 Dublin: -2°C
Sam Boal/Photocall Ireland
This Charming Man

Michael Noonan's going on a European charm offensive worth hundreds of millions

The Minister is looking to seal a deal for early repayment of our IMF loans, which would bring down repayments considerably.

THE MINISTER FOR Finance will test the waters for an early repayment of IMF loans with leading European figures next week.

The IMF last month confirmed that Ireland could repay its loans early with no financial penalty, raising the prospect of cutting hundreds of millions of euro off our annual debt repayments.

However, any such deal would require the agreement of the other parties that advanced cash to the State during the bailout era, including fellow troika members the European Central Bank and the European Union.

In addition to the troika loans, several bilateral loans were advanced from other member states including Sweden and the United Kingdom.

Under the loan agreements, all parties must be treated equally in terms of repayment scheduling, meaning the Government must negotiate agreement from our other debtors to secure the deal.

Noonan will travel to Brussels next Monday to meet EU Commissioner for Economic and Monetary Affairs Jyrki Katainen. On Thursday he will meet the CEO of the European Stability Mechanism, Klaus Regling, President of the Eurogroup Jeroen Dijsselbloem and ECB president Mario Draghi.

He will hold a series of meetings with EU Finance Ministers at the informal meeting of Ecofin (the council of European finance ministers) in Milan on Friday and Saturday.

In a brief statement, the Department of Finance said:

These meetings are taking place to seek the support of the relevant EU institutions and  member states. This support is required to enable repayment of the loans.

The exact scale of the savings would depend on the structure of any refinancing agreement, but Noonan said earlier this year that an early payback of €15 billion could save up to €375 million per year.

Ireland was lent €22.5 billion by the IMF under the bailout agreement.

Deal looks likely

Cantor Fitzgerald analyst Fiona Hayes said that she expects the EU and other debtors to agree to allow the Government to repay the IMG loans in a number of tranches over the next 18-24 months.

“For reputational reasons it would be good for Ireland to repay early. It’s not a done deal yet but it’s hard to see why they wouldn’t agree.”

Bondyield TradingEconomics Ireland's falling bond yields mean we'll pay less to service loans which we would use to pay back the IMF TradingEconomics

She said that she expects the NTMA to run a series of bond issuances to cover the early repayments, although raising the full €22.5 billion from the markets is unlikely. A 15 year bond, which would be appealing for insurance companies and pension funds, is more likely than the usual ten year paper sold off by the NTMA.

“A longer dated issuance will be hoovered up by insurance companies and pension funds, which are the natural investor for this.”

Exchequer figures

Elsewhere, new figures released this afternoon by the Department of Finance show that the exchequer deficit was nearly €1 billion lower at the end of August than a year previously.

Tax revenue to the end of the month was €24.9 billion, €2.04 billion higher than last year. Revenues for August were €423 million ahead of target, but the Department said this was “flattered” by delayed stamp duty receipts and corporation tax payments.

Revenues from the Local Property Tax (LPT) are marginally below profile, falling €6 million short of the target. €363 million has been collected under the measure so far.

On the expenditure side, spending is €476 million down on last year at €27.5 billion.

As usual, the Department of Health is the main overspending culprit, with outflows €115 million above its targeted budget.

It cost the State €5.5 billion to service its debt, an annual increase of €72 million.

Investec Ireland chief economist Philip O’Sullivan said that the figures would provide confirmation that public finances are “comfortably ahead of expectations”.

(This) will undoubtedly strengthen the hand of those looking for the brake to be applied to the government’s fiscal consolidation drive in next month’s budget. The previous €2 billion target for new fiscal measures is clearly dead in the water.

Read: The IMF says we can pay back our loans early – but what does that mean?>

Read: The IMF is back in town, and it’s not mad on the Government’s mortgage strategy>

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