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MoF expects credit upgrades

04/03/2016 14:26
The government hopes that the privatization of the Limassol port will send the right signals to foreign rating agencies that are expected to review its credit rating in the next few weeks.

Cyprus is preparing to exit the three-year adjustment program without having completed most of the reform measures included in it.

The privatization of the port allows the government to claim progress in structural reforms, at a critical time when Cyprus is expected to lose its eligibility for the ECB’s quantitative easing program.

The adjustment program ends in a few weeks with Cyprus balancing its budget and stabilizing the troubled financial sector.

But healthcare and public sector reforms remain on paper, while the privatization of the telecommunications and electricity market have not moved forward.

Major credit agencies will announce their reviews later in March and in April and the government hopes for new upgrades.

The minister of finance Harris Georgiades said on Thursday he is optimistic that the rating agencies will further upgrade the Cypriot economy`s credit rating.

“We have been on a path of upgrades for a while and this is actually a result of our efforts and also a result of the resilience of the Cyprus economy” he said.

Cyprus’ credit rating is below investment grade by several notches and, if rating agencies continue with the same pace of upgrades, the country should be out of the junk status some time in 2017.

Yesterday, both Mr. Georgiades and the vice president of the European Commission responsible for matters of the euro and social policy Valdis Dombrovskis, praised the efforts of Cyprus in relation to the adjustment program stressing however, that exit form the memorandum is not the end of the road.

As regards Limassol Port, the privatization is expected to be completed by the end of 2016. The consortium of the German Eurogate, the Cypriot Interorient and Luxembourg-based Eastmed will take over the container terminal while the consortium of the Dubai’s DP World and the Cypriot GAP will take over maritime services and the general trade terminal.

In the transition to the new regime, expected to be in place by the end of 2016, the government will need to change the role of the Ports Authority into that of a regulator, rather than a service provider.

The government hopes for annual revenues close to €50 mn from the three services under privatization.

Annual income is expected to double the amount that the Port Authority offers annually to the state.

The cost of operation of the regulator (Ports Authority) as well as the cost of porters’ compensations (close to €30 mn) is not included in these projections.

The Eurogroup convenes on Monday to discuss the Cypriot program for the last time before it expires.

Cyprus will not receive the last tranche of the program, as the parliament did not pass the bills on the privatization of Cyta.