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Cyprus

Cyprus mulls early repayment of Russian loan

Finance Minister Harris Georgiades (left) with new Central Bank Governor Constantinos Herodotou

Cyprus is considering an early repayment of part of a €2.5bn loan it obtained from Russia during the financial crisis, as its funding costs decline, Finance Minister Harris Georgiades said on Tuesday.

He was commenting on media reports that Cyprus was considering tapping the markets for a new bond issuance exploiting favourable market conditions to repay the Russian loan which has an interest rate of 2.5 per cent.

“What I can say is that this possibility is under consideration and possibly we will be in a position for concrete announcements very soon,” Georgiades said after a meeting with new central bank Governor Constantinos Herodotou.

Cyprus’ 10-year bond yields dropped to 1.37 per cent last Friday, marking a new low since 2015.

The minister said current market conditions were exceptionally positive for the Cypriot economy as they “create certain opportunities, which we are evaluating and we will not hesitate to utilise.”

Excluded from the financial markets, in 2011 Cyprus secured a €2.5bn from the Russian Federation in a bid to cover its financing needs.

The loan’s repayment period was extended to 2021 and the interest rate was cut to 2.5 per cent from 4.5 per cent in 2013, after Cyprus sought a bailout. The outstanding amount is €1.57bn.

Of his meeting with the new governor, Georgiades said cooperation between the supervisor and the ministry was being set on a new basis.

“The most important thing we have decided is that this cooperation will be systematic, will be continuous; evidently great progress has been achieved in our economy and the banking system in recent years but there is still work to be done and as part of this we thing the institutional cooperation between the CBC with the government, the ministry, is necessary,” Georgiades said.

The two men covered a wide range of issues concerning the banking sector though the most important one was to reduce non-performing loans further.

Herodotou sought to allay any thoughts regarding the supervisor’s independence.

“Communication does not affect the CBC’s independence, isolation does not help, communication is something that is justified because this way we will ensure … continuation of the financial stability we have achieved.”

The governor said he will also schedule meetings with political parties in a bid to have communication on every level.