Improving the Effectiveness of Public Debt Management in Cyprus


As a result of the financial crisis, public debt in Cyprus had increased significantly and access to international financial markets had been lost after the government borrowed significant amounts to support private sector financial institutions. To help stabilize its economy, regain investors’ trust, and obtain access to domestic and international financial markets, Cyprus needed to improve the effectiveness of its public debt management.


From 2015–16 the IMF worked with Cyprus’s Public Debt Management Office, within the context of its Economic Stabilization Program, to tackle these challenges. Through the medium-term debt management strategy that analyzed the financing requirements, debt portfolio risks and financing sources, the government of Cyprus began to effectively communicate its borrowing to all stakeholders. In addition, the medium-term debt management strategy paved the way for restoring the domestic treasury bill market, and treasury auctions began to be held regularly, leading to a reduction in the cost of borrowing relative to previous arrangements.


The IMF’s efforts, which also involved other international financial institutions, has made a positive impact. The country’s debt management actions became clearly communicated and well understood at an important time for the country’s economy. Improvements in the institutional structure of the public debt management office, the introduction of new functions such as investor relations, and the management of domestic treasury auctions all helped to re-engage financial markets. The Treasury also plans to engage firms that buy securities directly from the government more actively to strengthen their presence in the capital markets and enhance liquidity for government securities, all aimed at reducing the cost to the taxpayer by borrowing as efficiently as possible.