The Chancellor of the Exchequer (Mr George Osborne)
I would like to update the House on the UK’s bilateral loan to Ireland.
In 2010, the Government committed to providing a £3.2 billion bilateral loan to Ireland as part of an international assistance package of €67.5 billion including loans provided by the International Monetary Fund (IMF), European Union (EU), euro-area member states and other bilateral lenders Sweden and Denmark.
The UK provided this bilateral loan in order to help put Ireland back on a sustainable path, ensure economic stability and because Ireland is a key trading partner and ally. I regard Ireland’s stability to be a key component of the stability of the UK economy and the banking sector, particularly in Northern Ireland.
Ireland has now set out its intention to repay early up to €18.3 billion of loans obtained from the IMF. The IMF loans carry a significantly higher interest rate than other elements of the programme.
The loan agreements of all other creditors under the assistance package, including the UK, each have a clause requiring that Ireland makes a proportional early repayment to them in the event that Ireland repays any creditor under its assistance programme ahead of schedule. On 19 September, Ireland formally requested that the UK, and all other lenders besides the IMF, provide a waiver for this clause.
I can inform the House that I have today provided a waiver under clause 19.3 of the Credit Facility Agreement (Amended 4 October 2012) enabling Ireland to make early repayments to the IMF of up to €18.3 billion without the requirement to make pro rata early repayments to the United Kingdom. This decision does not amend the amount or timing of interest and principle repayments owed to the UK as originally foreseen in the Credit Facility Agreement (Amended 4 October 2012).
It is clear to me that, where all other lenders provide similar waivers, granting a waiver for the UK bilateral loan delivers significant benefits to Ireland’s fiscal position and debt sustainability in the coming years. However, the benefits of these actions are not exclusive to Ireland, as the potential improvements also enhance the likelihood of repayment of the UK’s loan.
The waiver I have agreed is conditional upon all other assistance providers, besides the IMF, issuing similar waivers. Ireland has also committed to ensuring the IMF continues to play a role in monitoring Ireland in the coming years. All member states have now agreed to provide a waiver to Ireland on the outstanding loans.
In addition to this announcement, HM Treasury has today provided a further report to Parliament in relation to Irish loans as required under the Loans to Ireland Act 2010. The report relates to the period from 1 April 2014 to 30 September 2014.
A written ministerial statement on the previous statutory report regarding the loan to Ireland was laid in Parliament on 28 April 2014, Official Report, column 33WS.