Bailout programme on track, no new measures, NPLs a concern
Officials from the Troika of international lenders said that Cyprus was on track with its economic adjustment programme following a ?10 bln bailout plan in 2013, and that no new fiscal measures were needed, but that some issues, such as privatisation and the extremely high levels of non-performing loans were still a concern.
Senior officials from the European Commission said upon completing their seventh assessment of the Cyprus programme on Friday that the reform agenda remains the same and no new measures are required, unless there is a clear need for them.
The Cyprus government hopes to be in a position to exit the programme in March 2016, three years after it was introduced, and possibly even record a surplus by not utilising all the funds allocated by the EC, the ECB and the IMF.
The Troika delegates stressed the needs to resolve the NPLs problem, with the loans outstanding for over 90-days and not serviced for six month now corresponding to just over 50% of the banking system’s loanbook.
They also said that the state mechanism handling these ‘bad loans’ as well as the banks ought to speed up their processes, as this will also help relieve thousands of homeowners who have repaid their mortgages but still do not have title deeds, as these are deposited by developers as guarantees for other unrelated projects.
Cyprus lost six months of implementing the bailout programme after the government dragged its feet on critical foreclosures and insolvencies laws from last October, while parliament delayed their passage on a populist platform.
As regarding privatisations and public administration reforms, the Troika officials said that “progress is still being made but there is the need to increase the pace of reforms”. .
“We see that Cyprus is emerging out of recession, growth is timidly on the up,” a senior EC source said.
The Troika has now set three prior actions for the disbursement of the next tranche of ?500 mln of aid.
These include the adoption of the bill on the issuance of title deeds of exposed borrowers, the approval by the Cabinet of the bills on the civil service reform and the establishment of a new company under the privatisation process of state-owned telecommunication authority Cyta.
The privatisation and split up into commercial operator and network owner of telco Cyta and the Electricity Authority of Cyprus, aims to raise about ?1.4 bln for the state by 2018, including from the outsourcing of services and management at Limassol port, which should be completed by mid-2016, as well as the sale of other stateowned assets.
In statements after the meeting with the heads of the Troika, Finance Minister Harris Georgiades said on Friday that the most important point of the evaluation was the upward revision of the expectations for 0.5% GDP growth in 2015, compared to a contraction of 0.5% estimated last Spring.
“The prudent fiscal policy will continue and I think that the combination of fiscal consolidation with the return to growth and the gradual adjustment of the economy that we have achieved, is perhaps the most important success of the Cypriot programme and confirms the need to continue to follow this prudent but effective policy to promote reforms and consolidation,” he said.
The emphasis is now on further promotion of the major structural changes that both the economy and the country need. Georgiades said that before the end of August the Cabinet should adopt the bill related to the reform of the civil service, and the bill that facilitates the attraction of a strategic investor for Cyta.
The bill pending before parliament on the issuance of title deeds to borrowers who are exposed to developers is scheduled to be debated in the plenary on September 3 as deputies failed to put the matter to a vote prior to closing the House for a summer recess.
Georgiades added that the bill to regulate and allow the sale of loans should be approved by parliament by the end of September and will also safeguard the rights of borrowers, which are not affected by the sale of loans.
Regarding the health sector, the Finance Minister said that among the important reforms to be promoted is the administrative and financial autonomy of public hospitals, adding that significant progress has been achieved in this direction by the outgoing Health Minister Philippos Patsalis, who resigned last week and has been replaced by George Pamborides.