## IMF Survey : Cyprus Turns Economy Around, Successfully Exits IMF Program

_IMF News, March 15, 2016_

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## Bibliographic details
- Authors: Eszter Balazs IMF Survey March
- Published: March 15, 2016

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### Main achievements of the program
- IMF arrangement had two main goals: to put the banking sector on a sound footing and to return public finances to a sustainable path; "Both of these objectives were met."
- Positive growth returned earlier than expected, "already last year," despite large fiscal consolidation; unemployment has begun to fall.
- Institutional and legal improvements introduced to reduce future vulnerability.
- Fiscal achievements:
  - Strong fiscal adjustment under difficult economic circumstances.
  - Adoption of a well-targeted income support scheme to protect the most vulnerable.
  - New legislation modernized the budget process, strengthened accountability for public spending, and established medium-term fiscal planning.
  - Tax collection made more efficient and equitable.
- Banking-sector achievements:
  - Capital positions and liquidity have been restored.
  - New foreclosure and insolvency rules encourage banks and borrowers to find workable solutions for unpaid loans.
  - System for issuing and transferring real estate title deeds changed to address long-standing property ownership assignment problems.

### Remaining vulnerabilities and key statistics
- Cyprus cancelled its program on March 7.
- Non-performing loans (NPLs) remain very high at 60 percent, equivalent to 150 percent of GDP.
- Public debt is "just over 100 percent of GDP."
- Unemployment stands at over 15 percent.
- The IMF and ESM made available to Cyprus €9 billion and €1 billion under their respective programs.
- Cyprus regained access to international financial markets "barely 16 months after the crisis" and has successfully issued debt three times since then.

### Policy recommendations and priorities going forward
- Vigorously apply program tools to reform the economy and build resilience.
- Banking sector:
  - Continue to work down the large stock of NPLs to shore up banks.
- Fiscal policy:
  - Maintain primary fiscal surpluses to lower public debt.
  - Continue to implement prudent policies and reforms after the program period.
  - Complete the pending reform of the public administration, with a goal to ensure the wage bill does not outpace the overall economy.
- Structural reforms:
  - Implement growth-enhancing structural reforms to reduce unemployment and sustain output growth.
  - Continue to carry out the privatization strategy.

### Program design and international coordination
- IMF and ESM programs were closely aligned in objectives and conditionality, with good collaboration among IMF, European Commission, and European Central Bank staff, enabling a single-voice approach.
- Division of focus:
  - IMF concentrated on financial and fiscal policies.
  - European institutions handled structural policies including privatization, health reform, competition, and labor markets.

### IMF technical assistance on potential reunification
- IMF assisting Greek- and Turkish-Cypriot communities with technical advice on economic and financial aspects of settlement negotiations.
- Work underway includes:
  - Developing macroeconomic and fiscal frameworks for a united Cyprus.
  - Integrating public finances through an efficient federal structure.
  - Assessing health of the financial sector.
  - Developing a strategy for the euro changeover in the Turkish-Cypriot community.
  - Constructing a reliable set of integrated macroeconomic statistics.
- Several missions have already taken place to support efforts toward an economically viable solution that will encourage trade and investment and raise long-term growth.

*IMF Survey : Cyprus Turns Economy Around, Successfully Exits IMF Program — By Eszter Balazs, IMF Survey, March 15, 2016*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [In The News](https://www.imf.org/en/news/search)
- [Read the press statement](http://www.imf.org/external/np/sec/pr/2016/pr1694.htm)
- [Cyprus and the IMF](http://www.imf.org/external/country/cyp/index.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar031516a_