Nicosia, November 13, 2015/Independent Balkan News Agency
Minister of Finance Harris Georgiades outlined on Friday the policy direction concerning financial management as Cyprus moves closer to exiting its three-year financial adjustment programme.
The eighth programme review, and perhaps the last review before the programme ends, has been completed with four prior actions before the last disbursement.
“The eighth and perhaps the last programme review has been successfully completed,” Georgiades said in statements following a meeting with the heads of the European Commission, the European Central Bank and the International Monetary Fund, collectively known as the Troika.
He said that the next disbursement is believed to amount to up to €350 million, depending on whether the state will inject €150 million into the nationalised Cooperative Credit Sector, which has increased its non-performing loans coverage ratio to 50%, reducing its Core Tier 1 capital to 12%. The last disbursement is expected to take place in end-January 2016 following a Eurogroup meeting.
In his remarks, Georgiades referred to the third quarter growth rate that accelerated further to 2.2% from 1.3% in Q2, noting “we have confirmed our projections that in 2015 the growth rate will be close and maybe exceed 1.5% of GDP.”
“Our effort is bearing fruit, the real economy started picking up but we must continue on the same pace,” he said and added: “we need to guard and strengthen our grow prospects and this prerequisites that reforms should continue, that the prudent public financial management will be the rule and that in general decisions on economic policy will be ones or responsibility,” he stressed.
Georgiades praised yesterday`s decision taken by the Parliament to approve a crucial bill on sale of loans, as responsible. On Thursday the parliament approved by a one-vote majority the bill which was a prior action for the completion of the eighth review.
Noting that the bill as approved by the parliament complies with the requirements set by the Troika, the Finance Minister noted that in the coming days the lenders will examine the final document to give their approval.
The eighth review concluded with the lenders setting four issues as prior actions for the last programme disbursement, that is before the early January.
Under the updated MoU, the parliament should approve the pending bill for the creation of a new state-owned Telecommunications company, to which the operations of the current telecomm company, Cyta, will be transferred before its privatisation in early January.
The Council of Ministers should by January approve a bill outlining the conditions governing the employment of the Cyta employees. Under the privatisation current structure, Cyta will remain as a state-owned company with a structure that will include the employees that will not opt to work for the new privatised company.
The Council of Ministers should also take a decision regarding the form of the unbundling of the state-owned Electricity Authority of Cyprus on the basis of the third EU energy package. However EAC is scheduled to be privatised by mid 2018. Under the programme, Cyprus should generate proceeds of €1.4 billion from privatizations by 2018, including Cyta, the EAC and the privatisation of the commercial activities for the Cyprus Ports Authority. The sale of the ports commercial activities is scheduled for the first quarter of 2016.
Furthermore, as part of the programme`s prior actions, the lenders will confirm by January that the provisions of the law on the sale of loans should comply with their requirements.
Ready to boost the Coop sector`s capital
Furthermore, Georgiades described as important the decision announced yesterday by the Coop Central Bank to increase its NPL coverage ratio to 50%, the highest in the banking sector, following an exercise by the ECB. “This would allow the Coops to more effectively pursue restructuring of its non-performing loans” which amount to €6.84 billion. As part of the €10 billion bailout, the state nationalised the Coop sector, as it replenish its capital with €1.5 billion.
Georgiades confirmed that the government stands ready to boost the Coop`s sector capital injecting further €150 million.
But he noted that the new capital injection is up to the European Commission`s Competition Directorate, which under the EU state aid rules, will have to approve a new restructuring plan.
He noted that if the DG COM will not give the green light before January 1st when the new EU Bank Recovery and Resolution Directive enters into force, then the state will not proceed with the capital injection and the Coops will have to generate the necessary capital from its profitability.