We thank staff for their constructive assessment of the eighth review under the Extended Fund Facility for Cyprus. The paper appropriately captures the economic developments since the last reviews and also covers topics of relevance for future reforms during the remainder of the program and beyond.
With two reviews remaining, it is important to mention that the current program, underpinned by the authorities’ firm commitment, is bearing results and laying the foundation for sustained growth and improved living standards for the people of Cyprus. Evidently, political ownership of and commitment to the program objectives, supported by broad social support remains strong, as the authorities share their international partners’ vision for a strategy to render the Cyprus economy in a healthy state.
The economic recovery that started earlier this year has continued, despite a challenging external environment. The financial situation of the three largest banks has strengthened; with encouraging evidence that loan restructuring is proceeding at a faster pace. The improved macroeconomic environment together with comprehensive reform of the insolvency and foreclosure laws will support a further acceleration of restructuring, in line with bank specific targets.
Fiscal performance has exceeded expectations and, with that, all end-June and continuous performance criteria have been met. Despite some delays, progress has been made on the program’s structural reform agenda, with all but one of the structural benchmarks implemented in full. The only partial implementation refers to the legislation to accelerate the transfers of title deeds, which has already been adopted by Parliament, and a decision by the Council of Ministers to address title deed transfers in non-legacy and new property transactions is expected to be adopted by end-October.