Cyprus repays part of its debt to the IMF earlier

Cyprus on Tuesday repaid earlier Euros 288 million of loan to the IMF as part of its bailout agreement concluded in 2013 with the ESM and the IMF, a Finance Ministry official told CNA.

Cyprus’ debt to the IMF declined to Euros 700 million, according to data released by the Cyprus Public Debt Management Office (PDMO), while Cyprus declined below its Special Drawing rights quota with the Fund.

The early repayment took place following the issuance of a 7-year 2.75% benchmark of Euros 850 million last June, in a bid to reduce debt servicing costs, as the certain debt to the IMF bore an interest rate of 3.52%. The remaining cash received from the specific EMT issued was used to roll over more expensive bonds of nominal value of Euros 500 million, PDMO said.

Both the IMF executive board and the European Stability Mechanism (ESM) board of directors approved the early repayment.

Speaking to CNA, an ESM spokesperson welcomed Cyprus’ early repayment as financially beneficial, noting that the approval followed the examples of Ireland and Portugal which also repaid debt to the IMF earlier.

Following the same process as with similar requests from Ireland and Portugal, the ESM concluded that it would be financially beneficial for Cyprus and supported the plan provided that a sizeable cash buffer was maintained, the ESM spokesman said in an emailed statement.

Building on earlier debt issuances and fiscal surpluses, the Cypriot Finance Ministry has accumulated a cash buffer that exceeds Euros 1 billion covering the island’s financing needs up to end-2018. Sources familiar with the matter told CNA that Cyprus market access was important as enabled Cyprus to repay part of its IMF debt while retaining the buffer level.

This early repayment lowers Cyprus’ debt service costs and smoothens its maturity profile, thus strengthening its debt sustainability and sending a positive signal to the markets about Cyprus’s improving market access conditions, the spokesperson concluded.

Source: Cyprus News Agency