EBRD pump­ing up to € 1 bln in SMEs and pri­vati­sa­tions

Financial Mirror (Cyprus) - - FRONT PAGE -

The Euro­pean Bank for Re­con­struc­tion and De­vel­op­ment, the EU’s mer­chant bank for in­vest­ments in trou­bled and emerg­ing economies, may be lifting its ex­po­sure to the Cyprus mar­ket to about EUR 1 bln, hav­ing said last week it will up its fund­ing fa­cil­ity to EUR 800 mln, up from the ini­tial EUR 600-700 mln pledged un­til the end of the decade ear­lier in the year.

This is in ad­di­tion to the EUR 120 mln the EBRD put aside dur­ing the re­cent cap­i­tal in­crease of the is­land’s main lender Bank of Cyprus, giv­ing it a stake of about 5% and propos­ing that re­struc­tur­ing and re­cov­ery ad­vi­sor Arne Berggren from Swe­den take a seat on the bank’s new board in the up­com­ing AGM on Novem­ber 20.

Li­bor Krkoska, Head of the newly-es­tab­lished EBRD of­fice in Cyprus, told the em­ploy­ers’ fed­er­a­tion (OEV) chief Chris­tos Michaelides on Thurs­day that the bank plans to invest in the en­ergy and tourism sec­tors, the pri­vati­sa­tion of semi gov­ern­ment or­gan­i­sa­tions and ma­jor projects, with pack­ages more than EUR 10 mln each.

Krkoska will over­see in­vest­ments and su­per­vi­sion of the al­lo­ca­tion of EBRD funds. The gov­ern­ment’s roadmap for pri­vati­sa­tion aims to raise some EUR 1.4 bln over the next four years from the full or part pri­vati­sa­tion of eight sta­te­owned en­ter­prises, in­clud­ing the prof­itable Cyta that en­joys a near 50% mar­ket share in the tele­com sec­tor, the power gen­er­at­ing EAC that con­trols more than 90% of the elec­tric­ity pro­duc­tion and sup­ply mar­ket and the Ports Au­thor­ity that owns and op­er­ates the ports of Li­mas­sol and Lar­naca and man­ages the li­censes for up­com­ing mari­nas, com­mer­cial ports and other leisure projects.

Asked to elab­o­rate on EBRD’s in­ter­est in en­ergy, Michaelides pointed out that their in­ter­est is of a more gen­eral na­ture and in­cludes re­new­able en­ergy sources. He noted that Cyprus has com­par­a­tive ad­van­tages to of­fer in this area. Last month, the EBRD forecasts zero growth for 2015 and a 3.5% fall of GDP in the cur­rent year for Cyprus.

The Septem­ber re­port about the “Re­gional Eco­nomic Prospects in EBRD Coun­tries of Op­er­a­tions” noted that con­di­tions are grad­u­ally im­prov­ing, but out­put is still ex­pected to fall fur­ther this year with a bot­tom­ing out in 2015. For 2014 as a whole, the EBRD ex­pects GDP to fall by 3.5%, which is slightly bet­ter than the re­cent ex­pec­ta­tions of -3.2% by the Troika of in­ter­na­tional lenders, it­self re­vised down from -4.2%.

The EBRD added that there more usual un­cer­tainty sur­round­ing the 2015 fore­cast, ex­pect­ing a bot­tom­ing out of the econ­omy by then, with zero growth for the year. The re­port said the econ­omy con­tin­ued con­tract­ing in the first half of 2014, al­beit at a slower pace, thanks to a grad­u­ally im­prov­ing ex­ter­nal en­vi­ron­ment and rig­or­ous im­ple­men­ta­tion of the au­thor­i­ties’ adjustment pro­gramme, sup­ported by the Troika.

It added that the coun­try re­mains in deep re­ces­sion, but signs of con­fi­dence and op­ti­mism are be­com­ing in­creas­ingly ap­par­ent.

EBRD’s decision to re­turn to Cyprus after more than a decade of post-EU ac­ces­sion pros­per­ity and fo­cus on pri­vati­sa­tions, the fi­nan­cial and cor­po­rate sec­tors was an­nounced in May after a decision at the share­hold­ers meet­ing in War­saw.

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