7th Nov 2013 15:31
ATHENS (Alliance News) - Cyprus' 10-billion-euro (13.3-billion-dollar) bailout programme is on the right track, but challenges still remain on restoring depositor confidence and repairing the banks' balance sheets, the country's international lenders said Thursday.
"Cyprus' programme is on track. All fiscal targets have been met with considerable margins, reflecting the ambitious fiscal consolidation underway, prudent budget execution, and a less severe deterioration of economic activity than originally projected," the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) said in a statement following their second review mission to Cyprus.
"Looking ahead, the main challenge is to repair the banks' balance sheets and restore depositor confidence. This is the key to the resumption of credit to the private sector, which is needed to support the economic recovery."
International inspectors, which began their review at the end of October, said structural reforms were also advancing and that there "has been significant progress toward the recapitalisation and restructuring of the financial sector."
Cypriot Finance Minister Harris Georgiades told journalists that the latest inspection visit "has affirmed the will and the determination of the government to implement this programme."
"There are difficulties and problems which still remain and the government will not be celebrating prematurely. Our efforts at reform must continue at the same pace," said Georgiades.
Under an international bailout programme agreed between Cyprus and its international lenders in March, large depositors in the Bank of Cyprus and Laiki Bank were forced to take considerable losses as a condition for the country receiving the rescue package from international creditors.
Approximately 47.5% of deposits valued at more than 100,000 euros in the Bank of Cyprus were converted into shares to help provide a significant buffer for the bank during the next three years due to its increasing non-performing loan portfolio. The bank reported losses of 2.3 billion euros for 2012.
Recently, the newly appointed chief executive of the Bank of Cyprus, John Hourican, told journalists that the issue of non-performing loans was among the institution's pressing issues.
Copyright dpa