2013年-IMF国际货币组织全球_Cyprus_Second_Review_Under_the_Extended_Arrangement_Under_the_Extended_Fund_Facility_and_Request_for_Modification_of_Performance_Criteria_133页_1mb

CYPRUS: Second Review under the Extended Arrangement and Request for Modification of Performance Criteria

Core Content Summary

This document outlines the Second Review under the Extended Arrangement under the Extended Fund Facility (EFF) and the Request for Modification of Performance Criteria for Cyprus, conducted by the IMF in December 2013. It includes the Staff Report, Press Release, and Statement by the Executive Director for Cyprus, along with supporting boxes, figures, tables, and annexes.

Main Points

1. IMF Program and Financing

• The Extended Arrangement was approved on May 15, 2013, for SDR 891 million (equivalent to about €1 billion) and is part of the Extended Fund Facility (EFF).
• Two purchases of SDR 74.25 million (about €86 million) have been made so far, with a third purchase proposed upon the completion of the second review.
• The European Stability Mechanism (ESM) has provided €4.5 billion since program approval (of €9 billion committed).

2. Recent Economic Developments

• The recession through September 2013 was less severe than initially expected.
• Private consumption remained resilient, and economic sentiment continued to improve.
• Exports, including tourism, held up, with tourism receipts increasing by 8% compared to 2012.
• Unemployment continued to rise, reaching 17% in October, largely due to voluntary retirement schemes in the banking sector.
• Inflation has moderated, with headline inflation (HICP) at -0.5% in October, the lowest since 2009.
• The current account moved to a surplus of 7.4% of GDP in the second quarter, driven by a sharp decline in imports.

3. Fiscal Performance

• Fiscal performance through end-September 2013 was better than programmed.
• The cumulative primary fiscal balance reached a surplus of 0.7% of GDP, overperforming by 3.1% of GDP compared to program projections.
• Revenues exceeded expectations by 1.4% of GDP, while expenditure was lower than projected by 1.7% of GDP.
• General Government balance was -848 million euros in the first nine months of 2013, improving to -346 million euros by end-October.

4. Financial Sector Developments

• Banks are curtailing credit due to deteriorating asset quality.
• Deposit outflows have continued, but tentative signs of stabilization are observed.
• Non-performing loans (NPLs) in domestic banks reached 46% of gross loans at end-September, with construction and real estate sectors having the highest NPL ratios (over 60%).
• Bank profitability has declined, with BoC reporting losses of €1.8 billion through June 2013 and Hellenic Bank posting losses of €90 million through September 2013.

5. Policy Implementation

• The program is on track, with all end-September quantitative performance criteria met.
• Structural benchmarks were also fulfilled, including the recapitalization of Hellenic Bank and the assessment of the restructuring plan for Bank of Cyprus (BoC).
• The recapitalization of Hellenic Bank was completed on November 1, without state aid and with foreign participation.
• Fiscal structural reforms are proceeding, but strong resolve is needed to kick-start the privatization process.

6. Political and Social Challenges

• Domestic political support for the program is sputtering, with opposition parties and labor unions criticizing austerity measures and privatization.
• Demonstrations are planned in mid-December, reflecting social unrest.
• Tensions between the President and the Central Bank Governor are complicating decision-making.

7. IMF Staff Appraisal

• The staff appraisal notes that uncertainty remains due to lingering financial sector vulnerabilities and challenges in policy implementation.
• Reforms in the financial sector and fiscal system are progressing, but more work is needed to ensure full implementation of bank restructuring plans and to restore confidence.

Key Information

• IMF Support: The program is supported by the European Stability Mechanism (ESM) and the European Central Bank (ECB).
• Economic Outlook: A modest recovery in the euro zone is supporting Cyprus, but a deeper contraction is expected in 2014.
• Private Sector: Private sector debt remains very high, and deleveraging is expected to be gradual.
• Financial Sector: Banking sector restructuring is ongoing, with foreign participation in bank recapitalization.
• Social Impact: Austerity measures are causing social unrest, with rising unemployment and falling wages.

Conclusion

The IMF review confirms that the program is on track, but challenges remain, particularly in financial sector stability, policy implementation, and social cohesion. The recession has been less severe than expected, but economic conditions remain difficult, with high private sector indebtedness and rising unemployment. The IMF continues to monitor the situation and support the reforms aimed at restoring economic stability and financial sector resilience.