€83.5mn IMF bailout approved for Cyprus

IMF approves €83.5mn in Cyprus bailout

Sat, 21 Dec 2013 14:56:42 GMT

International Monetary Fund (IMF) has agreed to grant 83.5 million euros (USD 114 million) in financial aid to Cyprus, as part of a 10-billion-euro bailout package for the austerity-stricken country.

On Friday, the IMF said it approved to release the new installment of its bailout loan to Cyprus after the debt-ridden country managed to meet the budget-cutting targets and other conditions of its bailout program.

IMF chief, Christine Lagarde, said Nicosia has made progress in stabilizing the country’s financial sector, stressing, “While macroeconomic outcomes have been somewhat better than expected, the economic situation and outlook remain difficult and subject to significant risks.”

Cyprus must comply with the conditions of the bailout program to receive each installment of the aid package over the course of three years.

With the new tranche of the bailout fund released, the IMF has so far disbursed 250 million euros of the three-year loan to Cyprus.

The troika of international lenders — the IMF, the European Commission and the European Central Bank — agreed in March to give a 10-billion-euro (USD 13.1-billion) rescue loan package to Cyprus to recapitalize its shaky banking system and help the cash-strapped nation to avoid bankruptcy.

The deal included the closure of the country’s second largest bank, Laiki Bank, and a 47.5-percent cut on deposits over 100,000 euros at the Bank of Cyprus to recapitalize it.

Nicosia received the new installment of its loan after the Cypriot parliament approved the country’s first post-bailout budget late on Thursday. The new budget provides steep spending cuts in 2014 to make sure the bailout conditions are met.

The lawmakers, who voted against the 2014 budget, argued that the Cypriot government’s tough austerity policies merely increase poverty instead of creating jobs, as benefits and pensions are slashed.

The troika of international lenders forecasts that the recession-hit country’s gross domestic product will contract 7.7 percent in 2013.

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