Approval for Greece's early repayment of IMF loans is credit positive, Moody's said in a report released on Thursday.
In an announcement, the credit rating agency noted that on May 2 Greece received approval by its creditors in the Eurozone to early repayment of around 40 pct of outstanding loans to the IMF.
"The early repayment of IMF reduces Greece's spending on interest and extends the average repayment period, both credit positive for the country," Moody's said, adding that the IMF's loans account for only 2.6 pct of the country's public debt, but their interest is significantly higher compared with the remaining debt of the country, particularly debt from the Eurozone and compared with recent bond issues by Greece." At the same time, the IMF's loans have a much smaller repayment period compared with loans from the EFSF and the ESM, the credit rating agency said.
Greece will repay to the IMF loans worth 3.7 billion euros this year and in 2020. The interest rate for these loans are 5.13 pct, significantly higher than the 1.14 pct average cost of funding from the EFSF and the ESM and higher compared with the 3.45 pct and 3.875 pct coupons of recent five- and 10-year bond issues by Greece. The early repayment of IMF loans will save around 150 million euros, or around 0.1 pct of GDP and 2.4 pct of interest spending for Greece.
Moody's noted that Ireland and Portugal, two countries that also proceeded with early repayment of IMF loans in their early stages of obtaining full access to capital markets, and like Greece currently, raised investors' confidence with their early repayments.