Leo Varadkar (Dublin West, Fine Gael)
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Question 270: To ask the Minister for Finance further to Parliamentary Question No. 141 of 16 December 2010, the reason he claims that the International Monetary Fund interest rate of 5.7% when Mr. Ajai Chopra of the IMF says that it is 4.1%; and if he will make a statement on the matter. [1124/11]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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IMF lending is denominated in the Fund's unit of account, Special Drawing Rights (SDRs). The SDR comprises a basket of four currencies, Euro, Sterling, the US Dollar and Japanese Yen. The IMF's lending rate is based on the three month floating interest rates for the currencies in the basket. The IMF's interest rate is a floating rate that is linked to the SDR interest rate with some surcharges applied on top of that. The way this works is that the interest rate depends on the amount borrowed and for how long it is outstanding. This is the rate that applies to all member countries of the IMF and this is a formula that applies to all member countries. It is not a number that is case specific. The IMF have two different types of loan facilities. One is for low-income countries that qualify for concessional financing, and the other is the regular facility and that is what Ireland is borrowing under so that the formula for the interest rate does not change

Quota subscriptions generate most of the IMF's financial resources. Each member country of the IMF is assigned a quota, based broadly on its relative position in the world economy. A member country's quota determines its maximum financial commitment to the IMF, its voting power, and has a bearing on its access to IMF financing.

In relation to the clarification sought by the Deputy, under the Extended Fund Facility arrangement which applies in Ireland's case, the basic rate (of charge) is based as stated above on the fluctuating SDR rate currently 33 bps to which a margin is added that is fixed annually in May, currently 100 bps, and a burden sharing element currently 1 basis point. Surcharges are added to the basic rate and, in Ireland's case, these amount by definition to 300 bps for credit outstanding above 300% of Quota after thirty-six months resulting in an overall cost of funds of 4.34% (for the first thirty-six months this surcharge for credit outstanding above 300% of Quota is 200 basis points). If the relevant IMF rate is technically swapped into fixed rate Euro of 7.5 years duration, it corresponds to the average interest of 5.7% quoted at the date of the EU-IMF Agreement. This expresses the IMF interest rate in terms which can be compared with the cost of borrowing from EU sources. Both interest rates equate to the same cost of funding.