Cyprus is making good progress in meeting the conditions of its multi-billion-euro bailout, but the high level of uncertainty over its economic outlook means that authorities must remain vigilant, the country’s international creditors said on Wednesday.
International Monetary Fund official Delia Velculescu said Cyprus’s 23-billion-euro bailout deal remains on track, adding that the country’s authorities have outlined an “ambitious agenda” so that it can stick to the agreement’s terms.
“Still, with large risks still clouding the outlook, fiscal prudence and strong and timely policy implementation are critical for the program’s success,” Velculescu said at a press conference to mark the end of the creditor’s first assessment.
She said the fact that the country’s biggest lender, Bank of Cyprus, which merged with parts of the now defunct Laiki Bank, has now been fully recapitalized under a restructuring plan is a “key step” for the lender to return to working normally.
But she warned that much more needs to be done for the bank to adapt to the country’s new economic realities.
Velculescu said Cyprus’s extensive cooperative bank network, which also being overhauled, will be recapitalized with creditors’ money loaned to Cyprus and won’t require depositors to take a hit.
On the upside, Velculescu said that a raft of tax increases and spending cuts targeting the bloated public sector already introduced have yielded better-than-expected results.
However, she warned Cypriot authorities not to let up in their efforts.
Cyprus Finance Minister Haris Georgiades said despite the good news, major challenges still lie ahead for the country and that the government remains committed to meeting all bailout targets.
“Efforts will continue and will intensify,” Georgiades told reporters.