FULL TEXT: IMF Approves E84.7 Mln 1st Disbursement To Cyprus

SINGAPORE (MNI) – The following is the full text of a release from the

International Monetary Fund on the completion of the first review under the

Extended Fund Facility Arrangement for Cyprus and approval of a E84.7 million

disbursement.

IMF Completes First Review Under Extended Fund Facility Arrangement for

Cyprus and Approves E84.7 Million Disbursement

The Executive Board of the International Monetary Fund (IMF) today

completed the first review of Cyprus’s performance under an economic program

supported by a three-year, SDR 891 million (about E1 billion, or U.S.$1.3

billion) Extended Fund Facility (EFF) arrangement. The completion of this review

enables the disbursement of SDR 74.2 million (about E84.7 million, or US$113.1

million), which would bring total disbursements under the arrangement to SDR

148.5 million (about E169.4 million, or U.S.$226.2 million). The Executive Board

also approved the authorities’ request for modification of performance criteria

on September 2013 fiscal targets.

The EFF arrangement, approved on May 15, 2013 (see Press Release No.

13/175), is part of a combined financing package with the European Stability

Mechanism (ESM) amounting to E10 billion. It is intended to stabilize the

country’s financial system, achieve fiscal sustainability, and support the

recovery of economic activity to preserve the welfare of the population.

Following the Executive Board discussion, Ms. Christine Lagarde, IMF

Managing Director and Chair, said:

“The Cypriot authorities have made commendable progress in implementing

near-term stabilization policies. They remain committed to taking further steps

to restore financial stability and the sustainability of public finances to

support long-run growth.

“Important policy actions were taken to advance the banking sector

strategy, including the recapitalization of the two largest banks without the

use of public support, and the exit from resolution of the merged institution.

Adequate short-run liquidity support by the Eurosystem remains critical to

restoring confidence while a strong business and funding model is being put in

place to ensure the bank’s long-run viability.

“Steps are being taken to recapitalize and restructure remaining solvent

banks and the cooperative credit sector. The authorities will also strengthen

the supervision and regulation of these institutions, and ensure the full

implementation of the anti-money laundering framework by banks. Improvements to

the private debt restructuring framework aim to facilitate corporate and

household deleveraging and maximize asset recoveries.

“Payment restrictions that were earlier introduced to safeguard financial

stability will be eased gradually to boost confidence and support economic

activity. The authorities need to implement carefully the measures included in

their recently published roadmap, based on achieving specific milestones in the

banking sector strategy, while maintaining sufficient flexibility in the event

of unanticipated developments.

“Cyprus is on track to meet its 2013 fiscal targets, thanks to the

significant consolidation underway and prudent budget execution. Given still

high macroeconomic uncertainty, continued fiscal prudence is called for.

“The authorities are embarking on an ambitious structural reform agenda.

Revenue administration reform aims to protect revenues and boost the efficiency

of collections, while overhauling the welfare system will help mitigate the

impact of the crisis on vulnerable groups.

“Risks to the program remain substantial, leaving no room for

implementation slippages. Continued strong ownership, including steadfast policy

implementation, is critical for the program’s success,” Ms. Lagarde said.

–MNI Singapore Bureau; tel: +65 6632-3412; email: elane@mni-news.com

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FULL TEXT: IMF Approves E84.7 Mln 1st Disbursement To Cyprus