March 20, 2015 / 2:06 AM / 4 years ago

Portugal says it has paid back 22 percent of IMF bailout loans

A man holds a Portuguese national flag as he shouts slogans against government policies in downtown Lisbon January 28, 2015. REUTERS/Rafael Marchante

LISBON (Reuters) - Portugal has started repaying its bailout loans from the IMF, reimbursing 6.6 billion euros (4.7 billion pound), or 22 percent of the total owed, in the past week thanks to record-low bond yields, the state debt agency IGCP said on Thursday.

The IMF provided a third of the loans extended under Portugal’s 78 billion euro rescue programme which Lisbon secured during a debt crisis in 2011 and exited last year.

A sharp fall in the yields Portugal can obtain to issue new bonds has made it worth paying off the IMF debt which has an interest rate of around 3.5 percent. Lisbon issued 10-year bonds at just over 2 percent last month and the yield has since fallen to around 1.7 percent in the secondary market.

The European Union, which provided the remaining part of the bailout, and charges less for its loans, has given Portugal approval to make 14 billion euros in early repayments to the IMF over the next 2-1/2 years. Lisbon has followed fellow bailout recipient Ireland in paying back the IMF.

The value of the IMF’s share in euros has changed since the start of the programme due to currency fluctuations. The Fund measures its loans in special drawing rights based on a basket of currencies.

Finance Minister Maria Luis Albuquerque said last month that Lisbon would start repaying its debts this month and then accelerate payments to take advantage of record low yields on Portuguese government bonds.

On Wednesday she said the country now “has its coffers full, and if anything happens around us that would disturb the market’s normal functioning, we can be calm for a long period without having to go to the market and still meet all our commitments”.

Some analysts say that if Greece were to leave the euro, Portugal’s bonds could again face market pressure due to the country’s high public debt level of around 128 percent of GDP.

Reporting by Andrei Khalip; Editing by Susan Fenton

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