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Portugal will pay the remainder of the loan granted by the International Monetary Fund (IMF) by the end of the year. The repayment guarantee of about 4.7 billion euros remaining due was given Thursday by Prime Minister António Costa to Parliament. This is the conclusion of an advance payment strategy initiated in 2015, still under the previous government.
With this payment, the Treasury will repay a total of € 28.5 billion to the Fund. The initial loan amounted to 26.3 billion euros. But IMF funding comes from special drawing rights, the "money" of the institution. And as it has appreciated in recent years, Portugal has had to make larger repayments. However, the impact will have been virtually neutral as the Treasury hedged currency risk through derivative instruments to reverse this effect.
The state is thus freeing itself from a large and expensive part of the troika loan. And it is no longer targeted by the Fund's post-program evaluations. These examinations take place in countries with debts exceeding 200% of the IMF quota or 1.5 billion special drawing rights (1.8 billion euros). The institution headed by Christine Lagarde will only analyze the Portuguese economy through Article IV.
Total loan of the Troika paid in 2042
Despite repayment to the Fund, 51.6 billion euros in funding from the European Union is still missing, which has not yet been paid. Portugal should have started repaying the loan in 2015. These loans are now 2021 as the indicative date for the start of repayments. European funding costs between 1.8% and 2.62%.
However, the Treasury and the Public Debt Management Agency (IGCP) are telling the marketplace that these repayments should only begin to be made after 2025 or 2026. "The average maturity of the EFRM loans [Mecanismo de Estabilização Financeira] will be extended for a period of seven years, from 12.5 years to 19.5 years. Each individual loan, close to its original repayment date, can be extended more than once until it achieves this goal. "
According to the simulations of the IGCP, the European loan should be fully paid only in 2042. And Brussels plans to continue post-program surveillance by 2035, while Portugal has already repaid 75% of loans from the European Union.
The effect of the ECB and the relief of retail debt
In early 2015, following the footsteps of Ireland, the government led by Passos Coelho asked the European partners permission to start repaying the entity headed by Christine Lagarde before the deadline of these loans. Get rid of the IMF now, a year after Dublin got it. The goal was to take advantage of favorable financing conditions on the market to reduce the interest bill. In early 2015, the European Central Bank launched the public debt repurchase program that reduced interest rates on eurozone sovereign bonds.
In Portugal, the 10-year rate fell below 2.5%. Investors demanded much less than the 4.4% required by the IMF for the 26.3 billion euros lent under the bailout program, which had an average duration of just over five years. Currently, the interest is less than 2%, reflecting the garbage exits of the ranking of Portugal. In recent years, rating agencies have given a positive rating to this debt management strategy.
In addition to these interest-bearing savings, the Treasury and the Public Debt Management Agency (IGCP) also explained these early repayments with greater flexibility in managing the average maturity of the Portuguese debt in order to reduce the risk of debt. refinancing.
But to get the money needed to crush the IMF loan, without sacrificing the financial cushion, the Treasury has taken advantage of the families' appetite for state debt. Since early 2015, between savings certificates and variable income Treasury bonds, small savers have made a positive contribution of more than 19 billion euros to public funding.
In some of the IMF's early repayments, the government acknowledged that household-based financing, in particular the OTRV, allowed the Fund to be paid without jeopardizing the financial cushion. It is only through this instrument that the Treasury has raised nearly 8 billion euros since early 2016.
Savings of 850 million
Early repayments to the IMF have eased the draft law on the interests of the state. The new payment had already been reported by Finance and the amount was now being formalized by António Costa.
Last month, Assistant Secretary of Finance, Mourinho Felix, had indicated in October that it was "realistic the possibility of further advance payments from the IMF loan". And he assured that "advances to the IMF have saved in this legislature, more than 850 million euros of interest".
After the repayment made earlier this year, Portugal cleared the most expensive part of the loan, with a spread of 400 basis points. Funding by fund is penalized for large-scale financing. DN / Live Money asked the Ministry of Finance and the IMF about the present value of the outstanding loan interest, but received no response.
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