Sunday, March 20, 2016

Cyprus exits IMF program early due to positive economic progress

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The Cypriot authorities canceled their financial arrangement with the IMF, which was set to expire in mid-May, after having turned around the economy of the island country.

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MF Survey: What crucial tasks remain for Cyprus?

van Elkan: Cyprus has gone from the acute care stage and is now well into the recovery phase. The program equipped it with the appropriate tools; which now need to be vigorously applied to reform the economy and build resilience. In the banking sector, the ratio of non-performing loans (NPLs) remains very high at 60 percent, equivalent to 150 percent of GDP. 

I have been adding to my Bank of Cyprus holdings as I have seen good progress by the bank in dealing with their non performing loan portfolio. The recent legislation passed in Cyprus which allows banks to foreclose and sell properties with defaulted loans will help. 

The improving economy will also help the bank to heal over time. We have some optionality here as any settlement between the Greeks and Turks on the island will result in an economic boost. Another potential long term call is the massive natural gas reserves that are offshore Cyprus. Development of these resources would definitely be an great boost for the economy. 

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