# Why are we borrowing so much from the EU-IMF?



## Brendan Burgess (11 Feb 2011)

*How much is the total fund? *



 EU-IMF|€67.5
  NPRF|€10
  Cash balances|€7.5
  Total|€85 *How will it be spent? *



 Deficits 2011/12/13/14|€40
  payments for Promissory Notes|€10
  Recapitalise AIB and BoI|€10
  Contingency fund|€25
  Total|€85 
*How will this affect our national debt? 
*Our national debt will rise by the amount we borrow plus the interest on it. 
Presumably the €10 billion for AIB and BoI will come from the NPRF, so it's not borrowing as such.

The €40 billion for our exchequer deficit has nothing to do with banking. We would have to borrow that anyway. If we didn't borrow it from the EU-IMF, we would try to borrow it on the bond markets.

*Have we any other money to spend? *
  We had €20 billion cash at the end of 2010, of which we are only allocating €7.5 billion to the above.  Not sure what happens with the balance of €12.5 billion 

  If all the forecasts above work out right, then we should still have cash in the bank of €12.5 billion at the end of the period. 

*When will we have to draw it down? 
*We don't have to draw it down until we need it. We have €20 billion in cash at the moment, so in theory, we could spend this first and the €10 billion from the NPRF. 

Cash needed for 2011


Expected deficit|€15
Additional capital for AIB and BoI|€10
Payments for Anglo & Nationwide Promissory Notes|€3
Total|€28 *What is the contingency fund for? *
  Contingencies. It’s the IMF-EU trying to convey the message that if there is a need for further funding, it’s there. It does not have to be drawn down if it’s not needed.  

*What is the rate of interest? *
  On average: 5.8%

*How much will that cost us per year? 
*It depends on when we draw down the money and how much we draw down. 
If we down €20 billion in 2011, then it would cost us around € €1.2 billion in interest in 2012.

*Why is the interest rate so high? 
*
The rate on the IMF loan is the same for all their clients. 

We are not being singled out for a specially high interest rate.


*Are the Greeks paying a lot less than we are?*


*Breakdown of the EU-IMF contribution*

   €22½ billion  from International Monetary Fund (IMF)
  €22½ billion  from European Financial Stability Mechanism 
 €17½ billion  from the European Financial Stability Fundü 
 €5 billion in bilateral loans from non Euro zone member states [UK €3.8bn, Sweden €598m and Denmark €393m}

*Exchequer Deficits from Annex 4 of The National Recovery Plan*


 Total|2011|2012|2013|2014
  40|14.7|11.7|8.6|5 *Source*
Department of the Taoiseach announcement


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## Brendan Burgess (11 Feb 2011)

Folks

Please read the guidelines for this forum

The idea is to provide a summary of the factual information. 

It is not another debating forum. I have moved the discussion about why we are paying so much for the EU-IMF deal to the


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## DerKaiser (11 Feb 2011)

Brendan Burgess said:


> *Why is the interest rate so high?
> *
> The rate on the IMF loan is the same for all their clients.
> 
> We are not being singled out for a specially high interest rate.



Based on current arrangements and current international interest rates, the average interest rate on the IMF’s loan to Ireland will 3.1% over the first three years and 4% in subsequent years. 

Changes in Ireland’s IMF quota will slightly reduce these interest rates to 2.99% over the first three years of the loan and 3.79% in subsequent years


It is expected that the average maturity of the EFSF and EFSM loans will be 7.5 years. They will be fixed rate loans. NTMA estimated in December that the average interest rates would be 5.7% for the EFSM loan and 6.05% for the EFSF. However, based on recent movements in market interest rates and the terms of the EFSM’s recently issued bond, I believe these interest rates are likely to be somewhat higher.

Source
http://www.karlwhelan.com/IrishEconomy/Oireachtas-Jan11.pdf


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