Greece set in motion the procedure to repay €3.9bn ($4.4bn) in pricier loans from the International Monetary Fund ahead of schedule, paving the way for the debt-stricken country to claim it has taken another step toward normalcy.
No country expressed an objection to the request, which was presented at a meeting of senior officials from euro-area finance ministries, according to three officials familiar with the discussion. A formal approval by Greece’s creditors will only come after they have formed a final opinion — a process which, in some cases, will include national parliaments.
Using cheaper funds to repay some expensive IMF loans has been a longstanding ambition of the Greek government, as it seeks to bring down its debt refinancing costs. It is subject to approval by other euro-area countries, which must waive their right to be paid back early by a proportional amount. This waiver has been granted in the past to former bailout countries such as Ireland and Portugal.
While other euro-area countries didn’t object to Greece’s request, the process is still expected to take up to a few months, according to one of the officials. A separate waiver may also be needed for the bilateral loans extended by euro-area countries as part of Greece’s first bailout, two of the officials said. Greece and its creditors struck a landmark deal last summer to ease the repayment terms for part of the nation’s mountain of debt, which stands at around 180% of its gross domestic product. Repaying the IMF early would reduce Greece’s obligations for the coming years since part of these loans are more expensive than both the bailout funds it has received from the eurozone and even the country’s cost of new borrowing from the markets.
Greece has already completed two successful bond sales this year, comprising a benchmark issue of 10-year notes and a five-year bond that raised a total of €5bn out of the annual target for €7bn from market financing.
The country is now considering selling more debt in the second quarter, most likely in the first half of May, in order to finalise its financing program as soon as possible, according to an official familiar with the discussions. Such a move would further boost the state’s cash reserves, which currently stand at some €34bn.
The Greek government also plans to offer investors who didn’t participate in a 2017 swap offer of notes issued under the country’s debt restructuring terms, the chance to exchange their holdings now. This could help make the country’s secondary debt market more liquid and mainly targets bondholders in the US, Greek officials say.
A security guard carries a cash box from the central branch of the National Bank of Greece in Thessaloniki. Using cheaper funds to repay some expensive IMF loans has been a longstanding ambition of the Greek government, as it seeks to bring down its debt refinancing costs.
