Loan Agreement for Cyprus Approved by Troika
Very Favorable Loan Agreement for Cyprus Economy Approved by Troika Cyprus has declared a need for assistance in order to refinance its banks and pay bills for the last months. This is a fact not hidden by the Cypriot government to the world. It has tried its best to convince troika to grant them assistance but has failed to convince it during the last months. Fortunately, November was a lucky month for the Cypriot government after it has announced troika’s approval of their bailout call.
Cyprus’ need for financial rescue was the result of its exposure with the Greek economy that has suffered tremendous financial crisis in the year 2010, which has cost it 4 billion euros or $5.2 billion. The Cyprus Popular Bank and the Bank of Cyprus PLC has been extremely weakened because of this that forced the Government to become the 4th euro nation to request for rescue from its neighboring nations.
Financial analysts claim that Cyprus Banks may need approximately 17.5 billion euros to recover from this crisis, which is an increased 2.5% in its previous troika loans. In the year 2011, the economy of Cyprus is calculated at 18 billion Euros based on the statistics gathered by the Cyprus Statistical Service and with this agreement pushed, this entails a fiscal adjustment of 7.3% from their expected gross domestic product between the year 2012 and 2016.
Last November 22, Dimitris Christofias has declared that the deal was close and the bailout has been stuck. However, much work is yet to be done, as continuous talks with the respective headquarters of these institutions are yet to discuss several matters. At present, the ministers are carefully studying the draft memorandum of understanding and soon after the receipt of the Pimco report, the exact amount of the bailout is also expected to be revealed.
Allocation of the funds that will be received from Troika will be distributed as follow: 10 billion will be used for the recapitalization of its main banks namely: Bank of Cyprus and Cyprus Popular Bank while the remainder is to be used to pay government needs like civil service wages, bonuses, and debts. Although troika was in doubt of the potential of Cyprus to pay this in the future, the discovery of natural gas in its territory has become of great aid to them since this has been utilized as claim worthy to be accepted by troika.
Some of the details left to be discussed for the full implementation of the bailout include public spending cutbacks, national pension fund, establishment of wealth management fund for future revenues concerning offshore natural gas exploitations and exploration, and the privatization of utilizing profiting bodies. News claim that Cyprus convinced troika to give 17.5 as bailout, which makes it the largest bailout in history in comparison to a country’s Gross National Product, but since Cyprus has been trusted to return funds accordingly, it has managed to convinced troika to grant them this privilege.
The approval of troika to grant the financial assistance request of Cyprus only gives more evidence that it is one of the booming economies in Europe. It has been a popular destination of many IBC because of its favorable tax rates and its tourism industry has also given the country’s economy its needed boost. Everyone is optimistic that with the full closure of this deal, Cyprus will once again bounce back in the global economic race and seek position in the global market.