Cyprus will soon start repaying bailout loans with money borrowed under more favorable terms, Finance Minister Harris Georgiades said on Tuesday.
Cyprus recently repaid two years early the remaining 1.8 billion euros — part of a 2.5-billion-euro loan obtained from Russia in 2011 in a bid to avoid bailout by the Eurogroup.
The loan had an original interest of 4.5 percent, which was later cut to 2.5 percent as part of the 2013 bailout of Cyprus by the Eurogroup and the International Monetary Fund (IMF).
Georgiades said that the next loan in line to be repaid early was the IMF’s contribution to the 10-billion-euro bailout arranged by the Eurogroup.
“We are planning, and have set in motion the formal process for the early and full repayment of the IMF loan. Cyprus can now borrow from international markets under more favorable terms,” the minister told lawmakers who started scrutinizing the 2020 state budget.
According to government calculations, early repayment of the IMF loan will result in the reduction of the sovereign debt of Cyprus to 91.1 percent of GDP in 2020. The IMF loan now stands at around 690 million euros.
Georgiades said that public debt will drop to 96 percent at the end of 2019.
“Although 96 percent is still high, it is not unusually excessive for an EU member state, and is deemed to be viable under all stress test scenarios,” Georgiades said.
The minister also said that in 2019, Cyprus will boast the best fiscal performance across the EU with an estimated budget surplus of just over 3.6 percent.
“We need to view budget surpluses as a buffer, given that the economic environment is uncertain and we cannot take it for granted that current growth trends will continue,” the minister told the lawmakers.
The 2020 budget provides for a projected government revenue of 10 billion euros and an expenditure of 9.4 billion euros.
The Cypriot GDP currently stands at around 20 billion euros.