The Executive Board of the International Monetary Fund (IMF) today completed the eighth review of Cyprus’s economic adjustment program supported by the Extended Fund Facility (EFF) arrangement. The completion of the review enables the disbursement of SDR 99 million (about €126 million), which brings total disbursements under the program to SDR 693 million (about €882 million). Completion of the ninth review would be expected to take place before the end of the year.

The three-year, SDR 891 million (about €1 billion) EFF was approved on May 15, 2013 (see Press Release No. 13/175). Cyprus’s economic program is also supported by financial assistance from the European Stability Mechanism (ESM) amounting to €9 billion.

Following the Executive Board’s discussion, Mr. Mitsuhiro Furusawa, IMF Deputy Managing Director and Acting Chair, issued the following statement:

“Cyprus’s reform program remains a success. Economic activity in the first half of the year has been better than expected, and fiscal outturns are running ahead of projections. Liquidity in the core banking system has continued to improve, and the prospects for resolving non-performing loans are improving. Going forward, it will be important to continue with sound macroeconomic management and maintain the reform momentum.

“A significant improvement in addressing non-performing loans remains an urgent priority to preserve financial stability and boost growth. In this respect, recent progress on making the new private debt restructuring framework operational is encouraging. To ensure effective implementation of the new framework, it is important to closely monitor implementation and correct any deficiencies. Adopting supporting legislation to facilitate loan sales and securitization and continued steps to enable swift transfer of title deeds will be essential to support balance sheet clean-up.

“Further efforts are needed to strengthen banking supervision and regulation. It is important that financial institutions continue their efforts to restructure loans. In light of continued uncertainties in the region, the financial status of Greek-owned subsidiaries will continue to warrant close attention.

“The strong fiscal performance is impressive. Nevertheless, high public debt together with sizeable contingent liabilities warrant continued prudence while ensuring support for growth-enhancing public spending and the safety net. Reform efforts should focus on advancing public administration, improving the management of government guarantees, and strengthening revenue administration.

“The authorities should press ahead on other key structural reforms to support growth. To this end, measures are needed to overcome the delays on the privatization program, and to improve the business environment,” Mr. Furusawa said.