Cyprus will receive before December 31 a 600-million-euro installment as part of the 2.5 billion loan agreement it signed with Russia on Friday, Minister of Finance Kikis Kazamias told CNA.
The 2.5 loan agreement, valid for 4.5 years, with a nominal annual yield of 4.5% was signed today in Moscow by Kazamias and Deputy Finance Minister of the Russian Federation Sergey Storchak.
“The climate was particularly friendly at our meeting with our Russian colleagues and I believe this agreement will assist Cyprus to face some of the consequences of the European and global financial crisis,“ Kazamias said.
Without elaborating, he added that those who questioned Cyprus` move to secure a loan from the Russian Federation are now appealing to Moscow for financial assistance.
ITAR-TASS news agency reported that the loan will be allocated in three installments of which the second will be disbursed in February 2012.
Given the slow economic growth and the Cypriot banking sector`s exposure to Greek sovereign debt, which in turn triggered a series of downgrades by rating agencies, Cypriot authorities are reluctant to tap international markets to refinance its maturing debt, as yields on Cypriot bonds on secondary markets have surged in recent months.
Amid the continuing financial crisis and the weak growth of the Cypriot economy, projected at a mere 0.2% GDP in 2012, the government introduced a series of austerity measures that would enable Cyprus to meet its medium term commitments to the EU and particularly for a budget deficit of 2.8 GDP in 2012 and a zero deficit by 2014.
The House of Representatives approved on December 14, a new set of austerity measures, aiming at further fiscal consolidation.
On December 16, the House approved, by majority vote, the state budget for 2012. According to preliminary estimates by the MPs, the total amount of savings -including savings of 148 million euro agreed with the Ministry of Finance from cuts on the Cost-of-living adjustment (COLA) – are estimated to reach 260 million euro. Operating expenses, which are decreased by 8%, reach 1.6 billion euro.
