LISBON (MNI) – The International Monetary Fund’s share of the E78
billion aid package for Portugal will carry an interest rate of 3.25%
for the first three years before rising to 4.25% “at current interest
rates,” IMF Deputy Director Poul Thomsen said Thursday.
The IMF will contribute one third of the package, or E26 billion,
with the remainder to come from the European Union, representatives from
the IMF and the EU said at a press conference here.
The interest rate on EU loans provided though the European
Financial Stability Facility and the European Stability Mechanism has
not yet decided but would be “somewhat higher” than that of the IMF,
said EU representative Juergen Kroeger.
As a benchmark, Kroeger noted that financial aid to Ireland carried
an interest rate of slightly above 5%, though for loans with a maturity
of seven and a half years. “So both loans are not comparable,” he said.
“There are attempts in the Ecofin to align our rates, which are
admittedly somewhat higher than the IMF loans, to those of the IMF.”
Thomsen said the program designed for Portugal called for two
thirds of fiscal adjustment to be front-loaded on the expenditure side.
Two thirds of the financial package would also be front-loaded, which
would be key “to avoid damaging credit crunch,” he said.
The program would allow the Portuguese government to stay “out of
the market for a little bit more than two years” for medium- and
long-term bonds, Thomsen said.
“It will give the government the breathing space it needs to
establish a credible record of policy implementation and undertake the
reforms in a socially balanced way,” he added. “Without this package,
the adjustment would have been forced and, socially, much more painful.”
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