INTEREST RATE:IRELAND WILL pay more than 6 per cent for some of the funds being made available under the European Union-International Monetary Fund (IMF) financial assistance programme.
The detailed cost of the €67.5 billion package was spelled out for the first time yesterday by the National Treasury Management Agency (NTMA).
It confirmed the “average interest rate . . . on the basis of market rates at the time of the agreement” is 5.82 per cent, but showed that the rates on the various sources of funding would range between 5.7 per cent and 6.05 per cent at today’s rates.
The IMF lending is denominated in an in-house unit called Special Drawing Rights (SDR). This is based on a basket of four currencies – the euro, dollar, sterling and yen – and the rate at which it is lent is determined by the three-month floating interest rate for those currencies.
The agency says the SDR lending is at a floating rate but for the purposes of the presentation of the programme, “this was expressed as the equivalent rate when the funds are fully swapped into fixed rate euro” for a 7½-year term.
On that basis, the applicable interest rate on the IMF money will be 5.7 per cent. If market rates have changed by the time the Government actually draws down the money, this rate could alter up or down. The Government is applying to draw down 19.3 billion SDRs, equivalent to €22.5 billion.
The €22.5 billion being lent by the European Financial Stability Mechanism – the EU’s programme for supporting member states – will be “at a rate similar to the IMF, ie 5.7 per cent per annum”.
The European Financial Stability Fund (EFSF), which will raise funds on the back of guarantees from euro zone states (other than Greece or Ireland) expects it will have to charge Ireland 6.05 per cent annually on its €17.7 billion in funding.
The NTMA says the “technical assumption” is that the €4.8 billion in bilateral loans coming from the UK, Sweden and Denmark will be lent on the same terms as the EFSF.
