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Cy to return to markets in late 2015

28/03/2014 06:43
The government aims the return of Cyprus to the markets in late 2015 or early 2016, according to a strategy document granted to the Parliament.

The draft of the medium-term public debt management strategy was prepared (for the first time) by the Ministry of Finance and covers the three years until 2016.

The most important strategic objective is to satisfy the financial needs of the state, which currently relies almost entirely on receiving money from the support mechanism.

The Ministry recognizes that at this stage there are not any reasonable alternatives. Therefore, the funding strategy is based on loans from the European Stability Mechanism and the IMF.

The Ministry hopes it will be ready to return to the markets in the coming years.

At the end of the strategy period, the interest rate and term indices are expected to show little improvement. At the same time, the debt will be characterized by increased refinancing risks, foreign exchange and interest rate readjustment.

It is noted that the public debt increased in 2013 by €15,3 to €18,5 billion in billion with half the difference be attributed to the borrowing for the recapitalization of the Coops with €1,5 billion from the European Stability Mechanism . The remaining difference was injected to the budget deficit and the increase in cash available of the state.

Since the loans from the ESM and the IMF are long term , the weighted average remaining maturity of the total debt has increased to 7.9 years .

With the restructuring of the loan terms with Russia, it was stated, a smoother repayment schedule between 2015 and 2021 was secured.

The financial needs for 2014 amount to €4,8 billion, in 2015 to €5 billion and in 2016 to €4,9 billion.

Lending rates in Cyprus are expected to decline in the coming years, allowing the country to return to the markets.

The risks that might impede the successful strategy include failure to serious objectives set out in the Memorandum, adverse developments in the assessment of Cyprus by the rating agencies, the ongoing debate on the debt restructuring and the increase in financial needs due to activation of existing government guarantees.