There have been a number of improvements to the terms our EU-IMF Programme loans since they were initially agreed in late 2010. These changes have included reductions of the interest rates and, in the case of the EU facilities, extension of maturities. We have also negotiated the replacement of the Promissory Notes issued to the Irish Bank Resolution Corporation (IBRC) with a series of longer term, non-amortising floating rate Government bonds. In addition, I am proposing to make an early repayment of a portion of Ireland's IMF programme loan.
When the programme was initially agreed in late 2010, the average interest rate on the €67.5 billion available to drawdown from the external sources was estimated by the EU Commission to be 5.82% on the basis of market rates at that time. The average life of the borrowing was initially set at 7.5 years.
In July 2011, the Euro Area Heads of State or Government (HOSG) agreed to reduce the cost of the European Financial Stability Facility (EFSF) loans, and similar reductions were subsequently agreed for the interest rates on the loans provided by the European Financial Stabilisation Mechanism (EFSM) and also by the three bilateral lenders (UK, Sweden and Denmark). It is estimated that the interest rate reductions on the EU funding mechanisms and the bilateral loans are worth of the order of €9 billion over the initially envisaged 7 ½ year term of these loans. As of July 2014 the all in euro equivalent cost of our EU-IMF programme loans was estimated at 3.4%.
Also in 2011, the average maturity of the EFSM and the EFSF loans was extended to 12.5 and 15 years respectively.
In April 2013, EU Finance Ministers agreed in principle to further extend the maximum weighted average maturities on our EFSF and EFSM loans by up to 7 years, over and above the extension agreed in 2011. This further maturity extension removes a refinancing requirement of some €20 billion for the Irish State in the years 2015 to 2022. This extension of maturities has a number of significant benefits for Ireland, including smoothing our redemption profile, improving long term debt sustainability and it also has a positive impact on the cost of Exchequer borrowing through creating further downward pressure on our borrowing costs.
In February 2013, the Irish Government replaced the Promissory Notes issued to IBRC with a series of longer term, non-amortising floating rate Government bonds. This has resulted in significant benefits to the State, including increasing the weighted average life from c.7-8 years for the Promissory Notes to c.34-35 years for the floating rate notes.
Finally, as you will be aware, I am proposing to make an early repayment of a portion of Ireland's IMF programme loan. Specifically the proposal is to make an early repayment of up to €18.3 billion of our €22.5 billion IMF loan, which is the portion subject to the highest rate of charge, and to replace it with less expensive market funding subject to prevailing market conditions.
For this to succeed, a waiver of the mandatory proportional early repayment clauses which are included in each of our loan agreements with the EFSF and the EFSM, and with our bilateral lenders, the U.K., Denmark and Sweden is required.
There was broad political support among Ministers when the issue was discussed at the Eurogroup and ECOFIN meetings last month. However, this support is subject to necessary national approval procedures including parliamentary approval in some Member States.
Estimates provided by the NTMA show that in a situation where the recent reduction in market yields is maintained it would be possible to achieve cash savings of the order of €1.5 billion. The actual savings that are generated from early repayment will depend on a number of factors such as the size of any repayments, general market conditions and the cost of the replacement market funding.
