Icarus, Daedalus and the IMF report on Cyprus
Officials at the International Monetary Fund, the third arm of the Troika of international lenders, must have mixed up their mythology when the former IMF Head of Mission to Cyprus likened the island’s economy to a crash-and-burn situation during a review of the island’s state of the economy.
The IMF executive board met on Monday to discuss the 2014 Article IV Consultation with Cyprus, the annual check up by the IMF of a country’s economy.
The consultation looks at a country’s economy broadly and provides policy recommendations going forward. In the case of countries with financial assistance, such as Cyprus, this takes place on a less frequent basis. Cyprus’s last Article IV consultation took place in 2011. The preliminary conclusions of the 2014 consultation were published on June 30. According to the Cyprus News Agency, during the board meeting to discuss the 2014 Article IV Consultation with Cyprus, Delia Velculescu, former chief of the IMF mission for Cyprus, likened Cyprus to Icarus, the mythological figure, who flew too close to the sun, burnt his wings, fell in the sea and drowned. Cyprus’ Dutch representative to the board Menno Snel replied that contrary to Icarus Cyprus has managed to float. He also likened Icarus’ father, Daedalus, to the IMF, noting that in Icarus’ case he did not heed his father’s advice, while in Cyprus’ case, the IMF did not do as much as it should to avert the crisis. Velculescu is being replaced by American Mark Lewis. The 2014 Article IV Consultation focuses more on the risks ahead and on what needs to be done rather than on progress achieved so far. It presents an account of how the crisis came about and refers to the policies implemented as part of the adjustment programme, as well as what should be done. Board members are said to have also discussed the pending matter of the legislative framework on foreclosures which as they pointed out needs to be settled in order for Cyprus’ banking sector’s non performing loans to be managed and for the adjustment programme to continue on track. The IMF’s mission on the 6th review of Cyprus’ adjustment programme is not expected to travel to Cyprus before the beginning of 2015.
However, a small technical team will visit Cyprus around November 10 to review pending or other matters related to prior actions. Cyprus has so far has received five tranches amounting to 5.77 bln from the EU and the IMF from the 10 bln bailout package.
The 6th Programme tranche of 433 mln euros was not disbursed in September due to non-compliance in introducing legislation on foreclosures as demanded by the Troika.