The Government paid off a further €3.5 billion of its International Monetary Fund (IMF) debt today, bringing total repayments to €12.5 billion.

A further €5.5 billion is to be paid off in “coming months” as part of an early repayment plan which is forecast to yield interest savings in excess of €1.5 billion for the State.

The Government received permission from bailout lenders last year to pay off €18 billion of its €22.5 billion IMF debt, with the aim of tapping private markets for debt carrying a lower rate of interest than most of the IMF loans.

"These saving are achieved because Ireland can now borrow at record low interest rates, as investors recognise the sustainability of our debt position and the growth potential of the Irish economy," Minister for Finance Michael Noonan said in a statement.

“Lower rates lead to lower interest bills on the national debt thus reducing the amount of tax revenues and borrowing that go towards financing the debt.”

The National Treasury Management Agency (NTMA), which managed the transaction, said the latest repayments discharge all scheduled IMF principal repayment obligations which were due from July 2015 until June 2019 under the original agreements with the Washington-based fund .

“Subsequent early repayments, planned for 2015, will target later scheduled repayment dates up to January 2021,” said the NTMA.

The debt agency is considered likely to pay the additional €5.5 billion foreseen in the early repayment deal by the middle of the year, possibly within weeks.

Remaining tranche

The remaining €4.5 billion tranche of the IMF debt was not to be paid off early as the relevant rate of interest - just above 1 per cent - is lower than prevailing market rates at the time the repayment deal was struck last October. Since then, however, Irish 10-year borrowing costs have dropped below 1 per cent.

Asked whether this question might now be revisited, Mr Noonan’s spokesman indicated that the current process goes no further than the €18 billion foreseen at the outset.

“At the moment no approval has been received to pay off any more than the €18 billion agreed by European ministers,” the spokesman said.

“However, the Government will continue to look at all methods of improving Ireland’s debt sustainability.”

It is known that the IMF's continued participation in post-bailout surveillance of Ireland's public finances by the troika bodies was a precondition for European ministers to approve the repayment deal. It is unclear whether the IMF could under its own rules continue to participate in such surveillance if the Government repaid the total €22.5 billion borrowed from the fund.

The repayment follows the NTMA’s sale of Ireland’s first 30-year bond during the week.