{ "title": "IMF Executive Board Concludes First Post-Program Monitoring Discussion with Cyprus", "publication": "IMF News, June 8, 2017", "sourceUrl": "https://www.imf.org/en/news/articles/2017/06/07/pr17212-imf-executive-board-concludes-first-post-program-monitoring-discussion-with-cyprus", "canonical": "https://www.imf.org/en/news/articles/2017/06/07/pr17212-imf-executive-board-concludes-first-post-program-monitoring-discussion-with-cyprus", "overlayPath": "/en/news/articles/2017/06/07/pr17212-imf-executive-board-concludes-first-post-program-monitoring-discussion-with-cyprus/index.md", "summary": "

On June 7, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the first Post-Program Monitoring Discussion with Cyprus.

", "publishDate": "2017-06-08", "sections": [ { "heading": "Economic developments and near-term outlook", "content": "- Cyprus’s economic recovery strengthened in the 15 months since exiting the Fund-supported program.\n- Real GDP growth:\n - 2016: 2.8 percent (robust)\n - Projected 2017: 2.7 percent\n - Projected 2018: 2.5 percent\n- Drivers and dynamics:\n - Growth in 2016 was broad-based and supported a sharp drop in the unemployment rate.\n - Excluding large one-off imports, the current account deficit continued to narrow.\n - Earlier gains in price competitiveness have been preserved.\n - Restructuring of nonperforming loans has gained momentum, but balance-sheet clean-up (private and public) is progressing slowly and indebtedness remains very large.\n- Labor market and prices:\n - Unemployment rate (EU standard):\n - 2014: 16.2 percent\n - 2015: 14.9 percent\n - 2016: 13.3 percent\n - 2017 (proj): 11.8 percent\n - 2018 (proj): 10.7 percent\n- External balance:\n - Current account balance (percent of GDP):\n - 2014: -4.3\n - 2015: -2.9\n - 2016: -5.3\n - 2017 (proj): -3.2\n - 2018 (proj): -3.5" }, { "heading": "Fiscal outcomes and public debt outlook", "content": "- Fiscal performance:\n - Fiscal primary surplus (cash basis) in 2016: 2.3 percent of GDP (sizable), supported by earlier reforms and improving cyclical conditions.\n - Primary fiscal surplus expectations:\n - 2017: 3 percent of GDP\n - 2018–22: 2½ percent of GDP\n- Public debt trajectory:\n - General government debt (percent of GDP):\n - 2014: 107.1\n - 2015: 107.5\n - 2016: 107.8\n - 2017 (proj): 106.8\n - 2018 (proj): 105.1\n - Staff projection: public debt net of cash holdings to fall to just over 80 percent of GDP by 2022, helped by fiscal surpluses and repaid debt servicing.\n- Sovereign financing:\n - Cost of market-based borrowing by the sovereign has fallen considerably.\n - Authorities intend to repay early part of Fund credit." }, { "heading": "Medium-term growth and balance-sheet adjustment", "content": "- Growth prospects:\n - Over the medium term, pace of growth expected to gradually ease to just over 2 percent.\n - Main reasons: expected pickup in private sector debt servicing and rebuilding of savings buffers (trimming consumption growth), and gradual dissipation of the ongoing surge in investment.\n- Debt deleveraging and banking sector health:\n - Write-down of debt plus stepped-up debt servicing expected to gradually restore private indebtedness to a more sustainable level and improve banks’ financial health.\n - Nonperforming loans: progress has been made, but reductions need to accelerate." }, { "heading": "Executive Directors’ assessment and risks", "content": "- Overall assessment:\n - Directors welcomed notable achievements: strengthening output and employment growth, sizable primary fiscal surpluses, and gradual healing of the banking system.\n - However, high levels of private-sector debt, nonperforming loans, and general government liabilities have not yet been significantly reduced.\n- Repayment capacity and risks:\n - Cyprus’s capacity to repay the Fund is satisfactory but subject to risks.\n - Sustained moderate GDP growth and primary fiscal surpluses, supported by a backloaded maturity profile of official debt and continued market access, underpin repayment capacity.\n - Directors urged building policy buffers and reducing private and public sector debt to safeguard repayment ability against volatile growth or financial shocks." }, { "heading": "Policy recommendations from Executive Directors", "content": "- Banking sector and private debt:\n - Accelerate downward paths of nonperforming loans and private sector leverage to:\n - Strengthen efficiency of credit allocation.\n - Eliminate debt overhangs.\n - Protect adequacy of banks’ capital.\n - Improve the payment culture.\n - Formulate tools that incentivize banks to offer sustainable loan workout packages to viable debtors.\n - Increase reliance on third-party debt servicers.\n - Streamline court procedures for claims settlement.\n - Ensure regulations encourage timely recognition of losses.\n- Fiscal policy and public debt reduction:\n - Further efforts to curb public debt to create fiscal headroom and insulate the downward debt path from shocks. Measures could include:\n - Saving overperformance and windfall revenues.\n - Restarting stalled privatizations.\n - A few Directors cautioned that additional fiscal effort could hinder the economic recovery.\n - Allocate additional resources to growth-enhancing public investment.\n - Implement structural fiscal reforms to avoid expenditure slippages and unfunded tax cuts.\n - Directors welcomed authorities’ commitment to ensure healthcare, public sector wage bill, and public sector pension reforms do not pose risks to fiscal sustainability.\n- Structural reforms to support growth:\n - Restart macro-critical structural reforms to enhance competition and encourage broad-based investment and economic growth.\n - Recommendations include:\n - Establishing a dedicated commercial court.\n - Strengthening enforcement of commercial claims.\n - Reviving the privatization program." }, { "heading": "Selected economic indicators (highlights from 2014–2018)", "content": "- Output and demand (percent change unless otherwise indicated):\n - Real GDP: 2014: -1.5; 2015: 1.7; 2016: 2.8; 2017 (proj): 2.7; 2018 (proj): 2.5\n - Domestic demand: 2014: 3.0; 2015: 3.9; 2016: 1.4\n - Private consumption: 2014: 0.7; 2015: 1.9; 2016: 2.9; 2017 (proj): 2.3\n - Fixed investment: 2014: -17.5; 2015: 12.0; 2016: 26.0; 2017 (proj): -4.5; 2018 (proj): 15.0\n - Exports of goods and services: 2014: 4.2; 2015: 3.6; 2016: 5.0\n - Imports of goods and services: 2014: 4.6; 2015: 2.1; 2016: 5.3; 2017 (proj): 7.4\n - Potential GDP growth: 2014: 0.2; 2015: 1.3\n - Output gap (percent of potential GDP): 2014: -6.6; 2015: -5.4; 2016: -3.4; 2017 (proj): -1.8; 2018 (proj): -0.7\n- Prices:\n - HICP (period average, percent): 2014: -0.3; 2015: 1.5\n - HICP (end of period, percent): 2014: -0.9\n- Employment:\n - Employment growth (percent): (table includes employment growth line but specific annual values are not provided in the source excerpt)\n- Public finance (percent of GDP):\n - Revenue: 2014: 39.3; 2015: 38.9; 2016: 38.8; 2017 (proj): 39.2; 2018 (proj): 38.2\n - Expenditure: 2014: 39.5; 2015: 40.3; 2016: 39.1; 2017 (proj): 38.5; 2018 (proj): 38.4\n - General government balance: 2014: -0.2; 2015: 0.6\n - Primary Fiscal Balance: (values not shown in table excerpt beyond narrative)\n- Balance of payments:\n - Trade Balance (goods and services): 2014: 1.2\n - Nominal GDP (billions of euros): 2014: 17.6; 2015: 17.9; 2016: 18.4; 2017 (proj): 19.1\n\nIMF Press Release No. 17/212 — June 8, 2017.\n\n---\n\n\n References\n\n- Cyprus and the IMF\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2017/06/07/pr17212-imf-executive-board-concludes-first-post-program-monitoring-discussion-with-cyprus" } ], "bullets": [ "[Markdown version](/en/news/articles/2017/06/07/pr17212-imf-executive-board-concludes-first-post-program-monitoring-discussion-with-cyprus/index.md)", "[Structured JSON version](/en/news/articles/2017/06/07/pr17212-imf-executive-board-concludes-first-post-program-monitoring-discussion-with-cyprus/index.json)", "[Bundle manifest](/en/news/articles/2017/06/07/pr17212-imf-executive-board-concludes-first-post-program-monitoring-discussion-with-cyprus/bundle-manifest.json)", "Published: June 8, 2017", "Cyprus’s economic recovery strengthened in the 15 months since exiting the Fund-supported program.", "Real GDP growth:", "Drivers and dynamics:", "Labor market and prices:", "External balance:", "Fiscal performance:", "Public debt trajectory:", "Sovereign financing:", "Growth prospects:", "Debt deleveraging and banking sector health:", "Overall assessment:", "Repayment capacity and risks:", "Banking sector and private debt:", "Fiscal policy and public debt reduction:", "Structural reforms to support growth:", "Output and demand (percent change unless otherwise indicated):", "Prices:", "Employment:", "Public finance (percent of GDP):", "Balance of payments:", "[Cyprus and the IMF](http://www.imf.org/external/country/CYP/index.htm)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2017/06/07/pr17212-imf-executive-board-concludes-first-post-program-monitoring-discussion-with-cyprus/index.md", "json": "/en/news/articles/2017/06/07/pr17212-imf-executive-board-concludes-first-post-program-monitoring-discussion-with-cyprus/index.json", "bundleManifest": "/en/news/articles/2017/06/07/pr17212-imf-executive-board-concludes-first-post-program-monitoring-discussion-with-cyprus/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T20:54:24.789Z" }