By trying to do the right thing and swap some high interest Troika loans for lower rate loans from the current open market, Portugal’s Finance Minister aims to save time and interest payments.
This welcome offer to pay off over half of the IMF loan within the next 2 years needs to be analysed by the other creditors but should go ahead, using a financial model copied from Ireland which paid off its high interest loans early by swapping them for low interest ones.
The Left Bloc said that this repayment was but a drop in the ocean but could not argue with the logic as Portugal begun the formal steps to pay €14 billion to the International Monetary Fund, one of the three Troika creditors.
The Left Bloc's Pedro Filipe Soares stated that this financial move “can not be used to hide the national emergency,” countering a claim that had not been made.
Soares did have a point when asking "how is it possible that we have had assistance from the IMF at a cost higher than on the open market?" but ‘then was then and now is now’ and any swapping of loans to get the current market rate is a sound practice - depending on the repayment terms and conditions.
The Ministry of Finance confirmed today that it "already had written to international creditors asking permission to repay the IMF in advance," to the detriment of the other two lenders, the European Commission and the European Central Bank but ti is assumed that they will not mind too much as they may be next to get an early lump sum.
If this plan is approved, Portugal will have the distinct pleasure of returning more than half of €27.38 billion it owes to the IMF led by Christine Lagarde.
This move also will be looked at by Pedro Passos Coelho as a pre-election gem.
