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Next tranche set as Cyprus on track with bailout reform
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Cyprus is successfully carrying out the reforms necessary under its 10 billion euro (US$13.206 billion) bailout program and will get the next tranche of financial help as planned, a draft report by the European Commission showed yesterday.
Inspectors from the European Commission, the European Central Bank and the International Monetary Fund — together known as the troika — visited Cyprus in the second half of July to assess progress on strengthening public finances.
“Staff concluded that Cyprus’ economic adjustment program is on track,” said the draft report.
The report, which must be approved by EU finance ministers, means the next tranche of aid — 1.5 billion euros from the eurozone’s bailout fund — will be disbursed.
The sum will not be in cash but in the form of bonds that will be used to recapitalize the island’s financial sector excluding the Bank of Cyprus, which has a separate restructuring plan, and Cyprus Popular Bank, which has been closed down.
The IMF will separately disburse the next 86-million-euro tranche of its share of the bailout.
“The authorities have taken decisive steps to stabilize the financial sector and have been gradually relaxing deposit restrictions and capital controls,” the report said.
The island economy, hit hard by the restructuring of its once bloated banking sector, is expected to contract 8.7 percent this year after shrinking 2.4 percent in 2012. It is expected to contract a further 3.9 percent in 2014.
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