IMF says challenges will remain beyond bailout programme
The Cypriot economy will face important challenges even after the exit from the bailout programme, according to Mark Lewis, the outgoing IMF mission chief for Cyprus.
The core challenge, Lewis told a press briefing, is the high level of the non performing loans which has to be addressed in order for the banks to lend to businesses and to households again, as this will lead to growth.
“The programme is producing results” Lewis noted, giving credit to the authorities and the Cypriot people for their efforts.
Nevertheless he stressed that “looking ahead we are not all the way there” and noted that there are still important challenges that remain and will continue in the coming months in the context of the programme and after the programme as well.
He said that the problem of the NPLs in the banking system is an “essential challenge”, linked to growth, jobs and incomes.
He noted that the new insolvency and foreclosure frameworks must become fully operational, the authorities must deal with problem of title deeds and another step is to deal with the access in loan sales, “which will enable banks to deal with the NPLs problems and go back in the business of lending to households and to businesses”.
Lewis said that the public finances are quite positive, but “public debt levels are still high”. He added that it is important to maintain sound public finances in the period ahead, “while at the same time ensuring sufficient public spending to protect the poor and to support growth oriented public spending”.
This also includes reforms to improve the business and regulatory environment to facilitate economic activity, he noted.
A staff report released by the IMF on the eighth review of Cyprus’ bailout programme noted that “some reforms under the programme have encountered delays, and with the May 2016 legislative elections in sight, implementing the ongoing structural reforms will remain a challenge”.
The IMF’s Executive Board completed last Wednesday the eighth review of the economic adjustment program and approved the disbursement of about EUR 126 mln, which brings total disbursements to date to EUR 882 mln.