Greece’s Finance Minister Euclid Tsakalotos confirmed that Greece is planning to repay the loans from the International Monetary Fund (IMF) earlier than their maturity. Speaking to Radio Thessaloniki 94.5 FM on Tuesday Tsakalotos noted that the IMF loans are “very expensive debt”.
He pointed out that approximately 3.5-4.0 billion euros of the IMF debt carries an interest rate of 5.0 percent, at a time when Greece is able to borrow at much lower rates, of 3.4% and at 1.5% form the European Stability Mechanism.
The savings that will be generated can then be used to lower taxes and implement social policies, the minister said.
The government is considering to use the cash bufferof 11 billion euros for the repayment of the IMF debt.
In its Economic Bulletin of April, the Finance Ministry said “the cumulative fiscal overachievement in 2016-2018 stood, in nominal terms, at EUR 13 billion, of which approximately EUR 2 billion were distributed in the form of well-targeted one-off social dividend. The remaining amount of EUR 11 billion contributed to the build-up of a sizeable cash buffer, part of which could now be used for the early repayment of the most expensive segment of Greece’s official sector debt.”
It should be noted that Greece has to repay 9.3 billion euros to the IMF until 2024.
Early repayment requires the approval of the eurozone that could bless the Greek plans should other eurozone states waive their right to be paid prematurely. This exception has been given to countries under IMF program such as Ireland and Portugal.
ESM chief Klaus Regling and Eurogroup chairman Mario Centento have hinted that they support the early repayment.
So far, the Greek government has not submitted a formal request to the IMF. This could be done before the European and Municipality elections in May as such a move would significantly strengthen the political profile of the Greek Prime Minister.