International rating agency Moody’s on Thursday described Greece’s planned early repayment of part of the loans issued by the International Monetary Fund as a “credit positive.” Amounting to 2.7 billion euros, the payment was approved on Monday by the European Stability Mechanism (ESM).
Moody’s wrote in a note that the early repayment will reduce interest costs and marginally extend the average maturity of the national debt, leading to an overall improvement in the sustainability of the Greek debt.
The repayment decision “comes after capital controls were lifted, the government returned to international bond markets, the European Commission approved the government’s ambitious plan to improve banks’ asset quality and amid generally improving economic sentiment in the country,” Moody’s argued.
It went on to explain that the early repayment concerns the tranches of the loan due in 2019 and 2020, which form part of the country’s total dues to the IMF of 8.4 billion euros.
Notably, Moody’s estimates that the benefit from repaying these loans early will amount to about 70 million euros, which is much higher than the 33 million euros estimated by the ESM.