Prudent Portugal saves €1.9 billion interest on IMF loan
A total saving of €1.9 billion was presented on Tuesday by the president of the IGCP, the Agência de Gestão da Tesouraria e da Dívida Pública which manages Portugal’s national debt and bond issues.
Cristina Casalinho informed Parliament that they next step is to pay off other loans early.
Of the €78 billion granted to Portugal for its financial rescue, €26.3 billion came from the IMF.
Taking advantage of the improvements in market conditions since 2017, Portugal started to pay off the IMF debt and cleared it at the end of last year, 2018.
Finance Minister, Mario Centeno, already has stated that he intends to start paying off a whopping €51.6 billion in debt to European lenders.
Cristina Casalinho did not give a date for this ambitious plan but confirmed that the intent is to take advantage of lower interest rates, to issue bonds and to pay off expensive borrowings.
“2018 was marked by a marked improvement in funding conditions. The cost of financing fell from 2.6% to 1.8% in 2018 and currently stands at 1.5%,” said the debt manager.
In the secondary market, the decline is even more noticeable. Portugal’s 10-year debt traded below 0.40% on Tuesday.
Cristina Casalinho pointed to Portugal’s reduced refinancing risk (achieved by early repayment to the IMF) as a key factor, coupled with the improvement of the country’s rating by major agencies since the end of 2017.
One factor that has supported Eurozone countries, including Portugal, is the monetary policy of the European Central Bank, which maintains interest rates at historical lows and the current asset purchase programme.