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.
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.
In 2014, following a significant improvement in Ireland’s access to international credit markets, all creditors, including the UK, agreed to waive these clauses to allow Ireland to repay a substantial proportion of its loans from the IMF. A written ministerial statement updating the House on that waiver was laid in Parliament on 13 October 2014, Official Report, column 2WS.
Ireland has now set out its intention to repay early and in full the outstanding €4.5 billion owed to the IMF, as well as the bilateral loans of €0.4 billion from Denmark and €0.6 billion from Sweden, and replace these with loans with Irish sovereign debt.
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, Sweden and Denmark 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 principal 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 material 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 the other remaining creditors—the EU and euro area member states—issuing similar waivers.
By repaying the outstanding amount owed to the IMF, Ireland will no longer automatically be eligible for post-programme monitoring. This has been a crucial part of ensuring the Ireland loan provides value for money for the UK taxpayer, and the IMF have given assurances that they will continue to conduct staff visits up until the end of the originally envisaged post-programme period in 2021. This coincides with the scheduled repayment of the final tranche of the UK loan.
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 2017 to 30 September 2017.
A written ministerial statement on the previous statutory report regarding the loan to Ireland was laid in Parliament on 18 April 2017, column 36WS.