The International Monetary Fund (IMF) provided Cyprus with additional 114 million USD by signing off the Nicosia’s progress in complying with the conditions of its bailout package. Cyprus has to meet the conditionality of the IMF program in order to obtain every single instalment of the bailout funding over next three years. Cyprus almost defaulted on its debt and went bankrupt in March this year when it, among other contentious issues, also tackled a cash crunch resulting from the deep connection Cyprus has had with the Greek banking system.
In order to get a 10 billion euro bail-out package from Brussels and Washington, Cyprus had to close down one of its largest and most important banks. The country had to have deposits in other banks so that it could recapitalize it. Furthermore, the government committed itself to austerity measures that included privatization of state ports, electricity and telecommunications.
Christine Lagarde, IMF Managing Director, said that Cyprus had been very good at adhering to the program of reforms, stabilizing its financial sector and meeting budget-cutting objectives. Yet, Mrs. Lagarde also urged the Cypriot government to hurry with the process of privatization. She added that though macroeconomic indicators have been even better than anticipated, the economic forecasts remain gloomy and subject to many risks. In her opinion, the complete and timely implementation of the privatization and adjustment programs with public support is key to the restoration of economic growth and investors’ trust.
Cyprus received its first instalment of a 10 billion-euro aid package in mid-May this year. It was the fifth country after Greece, the Republic of Ireland, Portugal and Spain to turn to the eurozone for financial assistance during the region’s debt crisis. Cyprus’ economic situation got bad quickly after the collapse of the Greek economy due to the huge investments that Cypriot banks had allocated to Greek banks.
