Troika to record delays in Cyprus' public sector reform

Cyprus will surely come face-to-face with Troika’s recommendations, regarding stagnation in the reform process of the public sector and the state-payroll, Finance Minister Harris Georgiades mentioned SigmaLive about the lenders’ latest visit to the island on Monday. 

The Finance Minister has said that during the international lenders’ visit, their first after the program, the delegation of the EU Commission, European Central Bank (ECB), and International Monetary Fund (IMF) will expect to note that there has been a lack of or delay in the progress of the reform regarding the public sector, as the six proposed bill that were submitted to the parliament in August 2015, have not progressed.  

He added that the lenders are expected to pass on their comments regarding the delay to the next Eurogroup meeting, where all the EU Finance Ministers will gather.  Georgiades added that during the rest of the evaluation other delays or deviations are not expected.

The lenders are also set to focus on Cyprus’ economic performance, the rate of growth, and the effectiveness of the public finances, during the rest of their week-long visit, which the Finance Minister has said sis the most important way to serve the public debt.

An announcement from the Central Bank has said that the delegation is expected to examine the banking sector and the progress made in dealing with non-performing loans.  

Cyprus’ Financial Goals

There are two goals in Cyprus that are being made to stimulate the economy, SigmaLive Greek has reported.  

The first is to lower the non-performing loans and better the work of the banks, which would result in mitigating the dangers and allow crediting institutions to offer more loans to households and businesses.  This is expected to strengthen consumption, economic activity, and investment.  

Banks in Cyprus have been working to reduce their NPLs, as previous reports have shown on the reduction rates.

The second goal is to upgrade the credit rating of the island as per the evaluations of international credit rating agencies, as then Cyprus would be allowed to move investment grade and enter markets with more attractive bond yields.

The investment grade is important for Cyprus, which lost it in 2012, as it will allow the island to take part in the bond-buying program of the ECM and pay a lower interest rate on loans, SigmaLive Greek has reported.  

Therefore, the messages expected from the lenders evaluation are important as they will play a decisive role for the upgrade and improvement of the international investment sentiment towards Cyprus.

Recently, the ratings agency Standard & Poor’s upgraded the island’s economy to BB from the BB- rating.  

Why has Troika returned to Cyprus after the program has ended?

Georgiades has said that the visit is being conducted in the framework of the ‘post-program surveillance’, and is expected to be general enough, with the technical delegation not examining as many details as had been done in the past.

The goal, he mentioned, is to inform the European Stability Mechanism (ESM) and the Eurogroup on the progress of the Cypriot economy after the program, and to ensure anew that the country is in a position to serve its loan requirements.

Asked about any deviations or delays, the Finance Minister has said that he is sure that Troika will not note severe observations, aside from some reforms measures, such as the public sector.  If there are serious deviations from the goals, as had been outlined in the program, Troika – as has been outlined – must inform the state and the Eurogroup, so that the necessary measures can be taken.  

“Beyond that, there is no way Troika can impose something. I would like to recall that all EU member states are subject to strict rules in the context of European governance. These are contractual obligations of each member state, which are under pressure, whether there is a reform program, or not,” he said.

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