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Debt risk more manageable

26/02/2016 11:21
The risk profile of public debt has become more manageable in recent years, according to data released by the office of public debt management.

As part of the economic adjustment program, Cyprus borrowed money from official creditors with low interest rates and long maturities. This has helped limit the immediate borrowing needs of the country to about €2 billion until the end of 2018.

The debt management office aims to have a liquidity buffer of €1 billion to deal with abrupt changes in bond markets.

The data released by the office show that the share of debt expiring within the next five years fell to 34.4% in the fourth quarter of 2015 compared to 75.6% in 2012.

The share of debt expiring within a year also declined. It fell to 6.1% in the fourth quarter of 2015 from 21.2 % in 2015.

The one downside of the debt profile is the high percentage of debt with floating rates. Although Cyprus benefits from a low interest environment and cheap official lending, an increase in interest rates will have an effect on its capacity to service its debt.

The share of debt at a floating interest rate amounts to 47% and the share of debt at a fixed rate is at 53% against 43% and 57% respectively, in the second quarter of 2015.

As regards loans at floating rate, most (72%) relate to ESM loans.

With regards to currency composition 95% of the debt is in euro and only 5% in foreign currencies.

Most of the debt is related to loans from official sources (65%), followed by foreign bonds (18%) and domestic bonds (10%).