Dáil Éireann Debate, Tuesday - 29 January 2013
273. Deputy Michael McGrath asked the Minister for Finance if he will show separately in respect of each source of funding, EFSF, EFSM, IMF each bilateral arrangement, under the EU-IMF programme of assistance the blended cost of funding drawn down to date; and if he will make a statement on the matter. [4367/13]
View answerAs at 31 December 2012, the nominal liability of EU-IMF Programme loans amounted to €56.4 billion. Of this, loans from EU sources, including the bilaterals, amounted to €37.4 billion and loans from the IMF amounted to €19 billion. After adjustment for below-par issuance, deduction of a prepaid margin of €530 million, and the effect of foreign exchange transactions, the amount received by the Exchequer as at 31 December 2012 was €55.7 billion. I am advised by the NTMA that the position on the interest rates for our programme loans is as follows: In terms of the EFSF, €6.7 billion of Ireland’s EFSF loans are at fixed interest rates which were based on a matched EFSF bond/loan structure. As a result of changes to the EFSF’s structure which removed the direct link between specific bond issues and programme countries, the balance of Ireland’s disbursed EFSF loans, currently €5.5 billion, is part of a pooled system whereby all programme countries pay the same interest rate. The pooled interest rate is calculated daily and is based on the EFSF’s cost of funds in managing the pool. This can be characterised as the weighted average cost of its bond and bill issuance. As at 31 December 2012 the blended interest rate on Ireland’s EFSF loans was 2.82%.
Exceptionally, Ireland has one EFSF loan tranche of €1.27 billion which is considered to be part of the pool but has a fixed interest rate until February 2015, at which point it will roll at the pooled interest rate. The effective interest rate on Ireland’s EFSM loans is based on the EFSM’s cost of funds when it issues bonds. Such issuance is matched against the loans. Some of its matched issuance can be spread across both Ireland and Portugal. As at 31 December 2012 the blended interest rate on Ireland’s EFSM loans was 3.10%. The interest rate on the United Kingdom’s bilateral loan to Ireland is fixed and is based on the weighted gross redemption yield on all UK Debt Management Office gilt issuances to the market in the six-month period up to the date of the disbursement of each portion of the loan, plus a service fee of 18 basis points. As at 31 December 2012 the blended interest rate on Ireland’s UK loans was 2.70%. The interest rate on both bilateral loans from the Kingdom of Sweden and the Kingdom of Denmark is floating and is based on the three-month Euribor plus a margin of 100 basis points. As at 31 December 2012 the blended interest rate on these loans was 1.23%.
The interest rate on the IMF Extended Fund Facility is tied to the IMF’s market-related interest rate, known as the basic rate of charge. As the IMF loan is provided in Special Drawing Rights, which is composed of a basket of four currencies (USD, EUR, GBP, JPY), the interest rate is constructed from three-month Eurepo, US and UK Treasury Bills and Japanese Government Discount Notes rates plus a margin of 100 basis points. Borrowings of up to three times a country’s IMF quota are subject to the basic rate of charge. Borrowings above three times quota attract a surcharge of 200 basis points which is in addition to the 100 basis points margin which forms part of the basic rate of charge. This surcharge rises to 300 basis points three years after the loan size exceeds three times the quota. As at 31 December 2012 the overall blended euro equivalent interest rate on Ireland’s IMF loan was 4.16%. The Deputy should note that the mixture of floating and fixed interest rates across facilities and, in the case of the EFSF within a facility, makes it difficult to compare one facility directly against another as they contain different interest rate risk profiles and maturities. In addition, the floating interest rates quoted are at a point in time and are, therefore, subject to change depending on movements in market rates. Subject to these caveats, the NTMA has estimated that the all-in fixed euro equivalent cost of loans received under the EU-IMF programme was 3.36% at the end of December 2012.
