articles | 27 July 2015

Cyprus needs to step up pace of reforms, lenders say

Cyprus’ international lenders said the government needed to step up the pace of reforms, following completion of their recent review.

Staff teams from the International Monetary Fund (IMF) and the European Commission (EC), in liaison with the European Central bank (ECB), visited Nicosia during July 14-24 to review Cyprus’s economic reform programme.

In separate identical announcements, the European Commission and the IMF said the teams had reached staff-level agreement on policies that could serve as a basis for completion of the review, reflecting the progress and policies under the programme.

The financial situation of the banks was gradually improving, and there was tentative evidence that the slow pace of debt restructuring was picking up, the announcement said. Fiscal targets in the first half of 2015 were also met with substantial margins. In addition, the authorities were making progress on their structural reform agenda.

“The authorities’ commitment to the programme is bearing results in several areas, with the economic recovery starting in early2015 and unemployment starting to decline from still-high levels,” the lenders said. “Looking ahead, increasing the pace of reform will be essential,” they added.

Addressing the excessive level of non-performing loans in the banking system remained the number one priority.

The lenders said it was a necessary condition for a sustainable stabilisation of the banking system and would require further steps as a matter of priority.

“To this end, legislation to expedite the transfer of title deeds and to facilitate the sale of loans should be adopted as soon as possible,” the lenders said.

They also said the authorities should make all necessary efforts to effectively implement the new insolvency and foreclosure legal frameworks.

“Continued sound public finances are needed to ensure that public debt returns to an acceptable level while steering public spending toward growth-enhancing activities,” added the announcement.

“Finally, firmly moving ahead with structural reforms—including the privatisation process and the public administration reforms—is critical to cement the improvements in public finances and restore sustained economic growth.”

The conclusion of the reviews is subject to the approval processes of both the European Union and the IMF, which is expected to be initiated in September or October.

Source: Cyprus Mail

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