Written answers

Tuesday, 19 July 2011

10:00 pm

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
Link to this: Individually | In context

Question 146: To ask the Minister for Finance if he will refer to recent media reports that the drawdown of funds under the EU-IMF bailout programme is far ahead of schedule, and provide details of the most recent amount drawn down; if the drawdown is ahead of schedule or of our needs and, if so, the reason for same; how the funds have been used; how the excess amount was drawn down and, if held, if it is invested in commercial banks and the interest rate being received; if the interest rate is higher than the rate being paid to the EU-IMF; if he will confirm that any reduction in the rate under the bailout programme applies only to future moneys drawn down; the reason moneys are being drawn down in excess of current requirements; if the excess drawn down is being done by or encouraged by the Central Bank to take pressure off ECB money provided to commercial banks; the current estimate for the duration of the bailout programme; if the full amount provided in the programme will be required or if the bank bailouts will be less than the provision made in the programme; and if he will make a statement on the matter. [21292/11]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

The EU-IMF Programme of Support for Ireland was agreed in late 2010 and runs to the end of 2013. There has not been an excess drawdown of funds under the Programme. The drawdown of funds to date under the Programme is in accordance with the disbursement schedule agreed by my Department and the NTMA with the European Commission and the IMF. Following the combined first and second review of the Programme in April 2011, the phasing of the drawdown of funds was changed to provide for later draw down of funds and to reduce the amounts required in 2011. To date, Ireland's nominal borrowings are €23 billion under the EU/IMF Programme. The details are set out in the following table.

SourceLoan amountDraw downMaturityInterest RateEffective Interest Rate
Disbursement AmountDatefrom date of receipt.including all costs & EFSF Credit Enhancements
European Financial€5.00 billion€4.973 billion12-Jan-114 years 11 months5.425%5.54%
Stability Mechanism€3.40 billion€3.39 billion24-Mar-117 years6.175%6.21%
(EFSM)€3.00 billion€2.986 billion31-May-1110 years6.425%6.48%
EFSM – totals/weighted average€11.40€11.356.87 years5.91%5.99%
IMF€5.84 billion€5.84 billion18-Jan-1171⁄2years average life2.345%SDR = € 4.77% 1
€1.58 billion€1.58 billion18-May-1171⁄2years average life
European Financial Stability Fund (EFSF)€4.20 billion2€3.592 billion01-Feb-115 years 6 months5.22%55.90%
Overall Total€23.02 billion3€22.36 billion46.83 years; weighted average life5.58%

1. The current SDR floating rate (2.345%) on the IMF drawdown reflects the lower rate arising from a quota increase for Ireland on 4th March 2011. The estimated Euro Equivalent rate on credit outstanding is 4.77% (pricing 31st May 2010) after hedging.

2. This is the loan amount. The net loan, the amount made available to the Exchequer, from the EFSF is €3.592 billion after credit enhancement measures.

3. Taking account of €600 million in credit enhancement measures in the EFSF funding and below-par issuance by the EFSM and EFSF, the total cash received amount is €22.357 billion.

4. This is the overall Net Loan Amount.

5. This is the coupon of 2.75% plus the margin of 2.47%. The margin, in this case, has been paid in advance as per note 2 above.

The funds drawn down under the Programme of support are being used in accordance with the terms of the Programme. They are being applied to Exchequer financing, and also to recapitalise the Irish banks. This usage is in accordance with the objectives of the Programme, to return our economy to sustainable growth and to ensure that we have a properly functioning healthy banking system.

The Programme provides for a total of €85 billion of financial support, including €17.5 billion from our own resources. It was initially envisaged that €50 billion would be available for sovereign purposes – that is the funding of the Exchequer deficit and the refinancing of maturing loans – and up to €35 billion for bank recapitalisation. However, the prudential capital assessment review carried out by the Central Bank of Ireland in the first quarter of 2011 quantified the additional capital support required by the banking sector at €24 billion. It is anticipated that mitigating actions will generate up to €5 billion of the total, leaving €19 billion to be provided by the State. On this basis, some €16 billion of the funding originally earmarked for the banking sector is now available for sovereign funding, bringing the total available under the Programme for sovereign purposes to €66 billion. Based on current projections and assuming no market access, the State has access to sufficient funds for its needs into the second half of 2013. However, it is the stated intention of the NTMA to return to the debt markets before this point and as soon as market conditions permit.

In relation to the application of any interest rate margin reduction, as I have said on numerous occasions the Government is continuing to seek an interest rate margin reduction and every suitable opportunity is being taken to press our case for that reduction. It is my understanding that any interest rate margin reduction secured will apply to interest due on both existing and future drawdowns, but will not apply to any interest payments already made. In this context, I would refer the Deputy to my response to PQ 15570 of 14 June last. In relation to the investment of any EU/IMF borrowings this is commercially sensitive information and for this reason, details regarding investments and the interest rates earned cannot be disclosed.

Comments

No comments

Log in or join to post a public comment.