Cyprus Mail
Cyprus

Privatisations ban likely to translate to higher borrowing costs, commissioner says

By Stelios Orphanides

The head of the government’s privatisations unit said parliament’s decision to freeze the privatisation process for state telecom CyTA may affect Cyprus’s borrowing costs and credit rating.

The bill, passed by lawmakers a week ago and considered a likely candidate to be referred to the Supreme Court by President Nicos Anastasiades as unconstitutional, made international investors “suddenly” see that “things are not going as planned,” privatisations commissioner Constantinos Herodotou said in an interview to state radio CyBC on Thursday.

“It is something that credit rating agencies will take into account and there are questions which will be likely raised at roadshows,” planned by the finance ministry’s public debt management office ahead of the government’s new bond issue, he added.

Herodotou said the bill banning the government from seeking to privatise CyTA and the state owned power producer Electricity Authority of Cyprus (EAC) until the end of 2017, is an usual practice both in Europe and elsewhere.

Finance minister Harris Georgiades said on Monday that the bill interfered with the authority of the executive and was therefore likely to conflict with the constitution. Attorney-general Costas Clerides said on Wednesday that a substantial number of bills passed a week ago by the parliament, which he accused of acting sloppily, included provisions which violated the constitution. The government decided to freeze the privatisation of the EAC and pursue instead a separation of its operations. The privatisation law contains a clause which gives the parliament a final say in every transaction agreed by the government and investors.

“One of the first things we did after this decision was taken was to ask our financial advisor on how to manage this negative impact it could have on investors,” who demonstrated interest in CyTA or other assets included in Cyprus’s privatisations programme, Herodotou said.

He added that Cyprus’s international creditors inquired about the bill “out of interest, clarifying that they have no role to play” any more, after Cyprus completed its adjustment programme in March.

The programme also includes the sale or permit to use 17 state-owned real properties, the privatisation of the Cyprus Stock Exchange, the Organisation for Storage and Management of Oil Stocks, known widely by its Greek acronym KODAP, and the government residences in Troodos, which are rented to vacationing civil servants, the privatisations commissioner said.

On top of generating revenue for the government, Herodotou said, the use of the government residences in Troodos also aims at revitalising the region.

He added that the privatisation unit is also about to enter the second stage of selling the brand name and logo of Cyprus Airways, which run out of cash in January 2015.

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