Tuesday, 8 May 2012
Department of Finance
Question 152: To ask the Minister for Finance if he will provide a breakdown of the interest costs incurred by the State arising from all borrowing recently issued as part of the 2012 deal on the promissory note payment; and if he will make a statement on the matter. [22931/12]
It was decided to use a Government bond to meet the Promissory Note payment due at the end of March instead of borrowing under the EU/IMF Programme. The total cost of financing the repayment this way has two elements. The first element consisted of the estimated interest arising from the coupon of 5.4%. Based on the nominal amount of the bond of €3.46 billion, this equates to €187 million in a full year and around €140 million in 2012 because the bond was issued at the start of April and interest is only being accrued for the remainder of 2012. The second, technical adjustment, relates to the difference between the nominal issuance of €3.46 billion and its market value at the date of issue of €3.06 billion. The rationale for the technical adjustment is that the difference between the nominal and market value has to be accounted for over the remaining term of the bond in the general government deficit. Under ESA95 accounting rules, this difference is classified as interest and accrued over the lifetime of the bond.
Based on the remaining bond term of just under 13 years, the annual accrual in a full year is €30.8 million (€400 million divided by 13). In respect of the calendar year 2012, as the bond was issued at the start of April 2012, the accrual amount for three quarters of 2012 is estimated to be around €23m.