ATHENS (Reuters) - Greece is tapping into the cash reserves of pension funds and public sector entities through repo transactions as it scrambles to cover its funding needs this month, debt officials told Reuters on Tuesday.
Shut out of debt markets and with aid from lenders frozen, Athens is in danger of running out of cash in the coming weeks as it faces a 1.5 billion euro loan repayment to the International Monetary Fund this month.
The government has sought to calm fears and says it will be able to make the IMF payment and others, but not said how.
At least part of the state’s cash needs for the month will be met by repo transactions in which pension funds and other state entities sitting on cash lend the money to the country’s debt agency through a short-term repurchase agreement for up to 15 days, debt agency officials told Reuters.
However, one government official said they could not be used to repay the IMF unless Athens was able to repay the state entities the cash it borrowed from them.
Debt officials sought to play the repos as advantageous for both sides, arguing that the funds get a better return on their cash than what is available in the interbank market.
“It is not something new, it’s a tactic that started more than a year ago and is a win-win solution. It’s a proposal, we are not twisting anyone’s arm,” one official said.
In such repo transactions, a pension fund or government entity parks cash it does not immediately need at an account at the Bank of Greece, which becomes the counterparty in the deal with the debt agency.
The money is lent to the debt agency for one to 15 days against collateral - mostly Greek treasury paper held in its portfolio - and is paid back with interest at expiry.
The lender can always opt to roll over the repurchase agreement and continue to earn a higher return than what is available in the interbank market.
One source familiar with the matter has previously said Athens could raise up to 3 billion euros through such repos, but that it was not clear how much of that had already been used up by the government.
“There is a sum that has already been raised this way,” the debt official said without disclosing specific numbers.
Athens - which has monthly needs of about 4.5 billion euros including a wage and pension bill of 1.5 billion euros - is running out of options to fund itself despite striking a deal with the euro zone to extend its bailout by four months.
Faced with a steep fall in revenues, it is expected to run out of cash by the end of March, possibly sooner, though the government is trying to assure creditors it will not default.
“We are confident that the repayments will be made in full, particularly to the IMF, and there will be liquidity to get us through the end of the four-month period,” Finance Minister Yanis Varoufakis said during a late-night talk show on Greek TV on Monday. “March is sorted.”
Additional reporting by Renee Maltezou, editing by Deepa Babington/Jeremy Gaunt