October 28, 2019 / 10:40 AM / 3 months ago

EU approves Greece's repayment of IMF loans, cutting its debt costs

FILE PHOTO: The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S.,September 4, 2018. REUTERS/Yuri Gripas/File Photo

BRUSSELS (Reuters) - The euro zone’s rescue fund, the European Stability Mechanism, agreed on Monday to allow Greece to pay back earlier some of its debt to the International Monetary Fund, the ESM said in a statement.

The move, which concerns loans worth around 2.7 billion euros ($3.0 billion), allows Athens to reduce its debt-servicing costs, because IMF loans carry higher interest than Greece would now pay on the market.

The decision followed a Greek government request to the ESM in September to repay some of its loans to the IMF, which were worth about 9 billion euros.

“Greece’s early partial repayment to the IMF will be beneficial for both Greece and the ESM,” said the fund’s chief, Klaus Regling.

Greece, cut off from the markets during the sovereign debt crisis of 2010-2015, borrowed heavily from the IMF and euro zone governments.

Under the loan agreements Greece has negotiated with its euro zone lenders, the early repayment of 2.7 billion euros of debt to the IMF would have triggered proportional payment of 52.2 billion euros to the ESM and its predecessor, the European Financial Stability Facility, if the EU had not waived the obligation.

Reporting by Francesco Guarascio @fraguarascio; additional reporting by Renee Maltezou in Athens; editing by Larry King

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