Joan Burton (Dublin West, Labour)
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86. To ask the Minister for Finance his plans to take advantage of the current historically low interest rates to redeem national debt taken out at the height of the debt crisis and to replace it with new borrowing at a lower rate to make a saving for the Exchequer; and if he will make a statement on the matter. [38624/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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While it may appear attractive to replace debt that was issued at a higher borrowing cost than the cost that applies to debt issued today, the reality is more complex and less attractive. When bond yields fall, the market value of debt issued at higher rates goes up. This means it would cost the NTMA more to buy that debt from the investors who hold it than the NTMA originally borrowed. Put simply, a holder of a bond that is paying an annual coupon of 5%, for example, will not exchange that bond for a lower coupon without charging a significant premium. 

That said, the NTMA has taken steps to significantly reduce the refinancing requirement in the coming years and to reduce the debt service burden.

On 7 September I announced plans to repay early and in full the remaining IMF loan - which has an outstanding balance of circa €4.5 billion – as well the bilateral loans from Denmark and Sweden – which have a combined outstanding balance of €1 billion.

This follows early repayments to the IMF of just over €18 billion between December 2014 and March 2015 and means the full €22.5 billion loan from the IMF, as well as the €1 billion in loans from Denmark and Sweden, will have been repaid ahead of schedule.

The NTMA continues to pre-fund ahead of future obligations and to build up significant cash and liquid asset balances. These balances stood at €20 billion at end August and can be used to fund future debt redemptions such as next month’s €6.2 billion bond redemption.

The NTMA has also executed bilateral bond switches involving redeeming early shorter-term bonds in exchange for longer-term bonds, which reduced the 2018-2020 bond refinancing requirement by some €3 billion.

This year the Exchequer interest bill is expected to drop below €6.2 billion as against €7.5 billion as recently as 2014.

Finally, I would also add that through the buy-back of the Floating Rate Notes disposed of by the Central Bank of Ireland, the NTMA is locking in the current low market interest rates and is, in effect, taking out further insurance against rates rising into the future.