Brussels, 11/02/2014 (Agence Europe) - The Cypriot government will shortly begin the second phase of easing restrictions on the movement of capital, announced the troika of lenders (European Commission, European Central Bank and International Monetary Fund) in a joint statement on Tuesday 11 February at the end of their third monitoring mission.
The troika noted that progress is better than expected on the macroeconomic and budgetary fronts, but recovery of the Cypriot economy is still subject to substantial risks.
The troika says the second phase in the easing of restrictions on the movement of capital will begin “shortly”. This is the final phase set out in the government's roadmap and covers the restoring of cross-border capital movements after nearly a year of restrictions. In Nicosia, Cypriot Finance Minister Harris Georgiades said on Tuesday that the restrictions could be “significantly eased” from next week.
For the financial sector, the main problem is the non-performing loans that accounted for 42.35% of bank loans at the end of September 2013. The troika says that suitable arrears management programmes are needed and also calls for changes to the insolvency rules to give balanced incentives to prevent strategic defaults while providing solutions to enable a voluntary restructuring of debt to occur for viable borrowers.
On the budget front, strict introduction of the adjustment programme has enabled the 2013 targets to be comfortably reached thanks to better than expected macroeconomic developments. The island's GDP contracted by around 6% in 2013, better than the initial forecasts of 8.7%. The troika is sticking to its initial forecasts for 2014 of the economy contracting by 4.8%, but then returning to growth of 1% in 2015. The Cypriot government is expected to speed up the structural reform process, focussing on reforming social security, along with tax collection and privatisation. Georgiades said a new law on privatisation would be brought in before the next instalment of aid, expected in April, when €150 million will be forthcoming from the European Stability Mechanism and €86 million from the IMF. (EL/transl.fl)