Portugal will pay two billion to European creditors on Thursday

  • ECO News
  • 14 October 2019

The government had already announced that it was finalising the details to make a payment of two billion euros. However, the Treasury has now confirmed that the operation will be closed on 17 October.

first early repayment to European troika creditors will be closed this Thursday. The intention to make a payment of two billion euros had already been announced by the Government and Cristina Casalinho, president of the Treasury and Public Debt Management Agency (IGCP,) now confirmed that the operation will happen on 17 October.

“The payment to be made on 17 October is the result of a commitment made by the Portuguese Republic to its creditors at the time of the last advance payment to the International Monetary Fund (IMF). The only thing that is different is the date of payment. Initially it was foreseen between 2020 and 2022 and, since the market conditions are more favourable, it decided to do it earlier”, explained Casalinho, on the sidelines of the seminar Public Debt Markets – Challenges in a framework of deepening EMU, this Monday in Lisbon.

Deputy Secretary of State for Finance Ricardo Mourinho Félix had already announced that Portugal would make an early repayment of two billion euros to the European Financial Stabilisation Fund (EFSF). This amount relates to loans granted by the troika and is the first to European creditors after Portugal completed its payments to the IMF at the end of last year. The amount in question matured only between 2025 and 2026.

In order for Portugal to be able to pay into the EFSF, it has agreed with the creditors that there will still be an advance payment of €500 million to the European Stability Mechanism (ESM) until 2022 and that the €6.75 billion due to the ESM due in 2021 will be extended in terms of maturity to 2025 and 2026.

On new readjustments that would allow early repayment to continue, Cristina Casalinho recalled that it is a “political decision” and recalled the contractual parameters of loans that are different from the IMF, “which had structural conditions that favored early repayment”.

“Due to the architecture of the European project itself, European loans are not formatted in a way to expedite early repayments. Therefore, they are more complex processes and, although they may have some advantages financially, they do not have as overwhelming advantages as the IMF loans had,” said the IGCP president.