A draft report recently released by the European Commission indicates that Cyprus is successfully implementing its 10 billion euro bailout reform, and the country is on track to receive its next tranche of aid loans.
A mission from the troika—comprising the European Commission, the European Central Bank (ECB), and the International Monetary Fund (IMF)—visited Cyprus in the latter half of July to assess the country's progress in implementing reforms to strengthen public finances.
The report concludes that Cyprus's reform program is on track. The Cypriot government has implemented decisive measures to stabilize the country's financial sector and has been gradually easing deposit restrictions and capital controls.
The report notes that due to the significant fiscal consolidation measures and prudent budget execution implemented by the Cypriot government, the country's fiscal targets have been met, and structural reforms have penetrated key areas, although some areas still face delays or remain incomplete.
Although this report still requires approval from European Union (EU) finance ministers, it signifies that the next tranche of 1.5 billion euros in aid from the EU bailout fund is set to be disbursed.
These funds will not be issued in cash but provided through bonds. Consequently, financial sectors other than the Bank of Cyprus (BOC) will receive recapitalization, as the Bank of Cyprus, the country's largest bank, already has a separate restructuring plan, while the Cyprus Popular Bank has been closed.
In addition, the IMF will provide another 860 million euros in aid in proportion to its contribution.
