Ireland paid at least €709m in interest to UK for bailout loan
According to 'Irish Examiner' calculations based on a UK interim report published in October, Ireland will have paid at least £610m in interest to the UK over the course of the loan. Picture: Gareth Chaney
Ireland has paid at least £610m (€709m) in interest on the 2011 bilateral bailout loan it got from Britain, making it one of the most lucrative "no-risk" loans ever advanced by the UK to a sovereign government, the can reveal.
It comes as finance minister Paschal Donohoe said today that the National Treasury Management Agency had made the last instalment payment on the £3.2bn (€3.7bn) loan which was struck as part of the overall €67.5bn international bailout the State needed in the wake of the devasting banking and property crash of over a decade ago.
The loan was a separate bilateral loan but — unlike other and smaller bilateral bailout loans that Ireland struck with Denmark and Sweden — the British government under an Act of Parliament didn't allow early repayment of the loan, which would have likely reduced the cost of the interest payment bill to Ireland over time.
According to calculations, which are based on a UK Treasury interim report published in October, Ireland will have paid at least £610m in interest payments to Britain over the course of the loan — which represents one of the best no-risk returns that a sovereign government can make to another government.
Senior economist Jim Power said that "there was no risk involved" for the UK in issuing the loan to a fellow European government, and the interest bill to Ireland would have been less if the government here had been allowed to repay it earlier.
The interim report from the UK Treasury showed that the UK amended and applied a lower interest rate than initially planned in 2011 and represented the UK's cost of funding based on its own gilt or bond return, as well as a service fee.
The cost of funding for the loan the UK used was based on the average yield or interest rate of British bond issuance in the six months before a series of the disbursements of the loan.
The UK Treasury report notes that in 2017 the British government had consented to Ireland making early repayments to its bailout loans the Irish Government owed to the IMF, Sweden, and Denmark. But the British waiver did not extend to the interset or the principal repayments of its £3.2bn loan to Ireland.
Ahead of the final repayment by Ireland, the amount received by the British government in interest payments by June last year had reached over £600m, according to the report.
Finance minister Paschal Donohoe said he welcomed today's final repayment of the British bilateral loan. "This repayment marks the completion of another step along our journey since exiting the EU-IMF financial assistance programme in December 2013,” he said.
He said that Ireland did not seek early repayment of the UK bilateral loan because "as a fixed-rate loan, there were break costs associated with early repayment, which meant that it was not in Ireland’s economic interest to repay the loan early".
The minister said that Ireland made early repayments to the IMF up to March 2015 and paid off the rest by the end of 2017.
He said that Ireland made full early repayments of loans from Sweden, of €600m, and to Denmark of €400m at the end of 2017.
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