Greece's early repayment of IMF loans is credit positive, Moody's says
IMF loans account for 2.6 percent of Greek public debt, but they carry interest rates significantly higher than the interest on loans from its euro zone creditors and its recent bond sales.
Also, IMF loans have a much shorter maturity than the loans Greece got from the European Financial Stability Fund (EFSF) and the European Stability Mechanism (ESM) to stay afloat during its debt crisis.
"The early repayment to the IMF will lengthen Greece's maturity profile, which is already well spread out because of the very long repayment terms on the euro area loans," Moody's said in a Credit Outlook report.
Greece plans to repay 3.7 billion euros owed to the IMF this year and next. The interest rate on the loans is 5.13 percent, compared with an average 1.4 percent on EFSF and ESM funding or the 3.45 percent on its recently issued five-year bond and 3.875 percent on its latest 10-year bond.
Athens expects the early repayment will save around 150 million euros, or nearly 0.1 percent of gross domestic product. Its euro zone creditors approved the repayment earlier this month.
Funding for the early IMF repayment will come from the government's cash buffer, about 27 billion euros ($30.24 billion) at the end of last year, which has grown by 5 billion euros from the bond sales this year.
"Ireland and Portugal, which also made early repayments to the IMF when they were in the early phase of regaining full market access, as Greece is now, engendered investor confidence with their early repayments," the Moody's report said.
($1 = 0.8928 euros)
(Reporting by George Georgiopoulos)Reuters Messaging: firstname.lastname@example.org))