The government aims to bring public debt below 90 per cent by the end of 2020 and reduce non-performing loans (NPLs) to single digits, Finance Minister Harris Georgiades said on Thursday, as he reiterated that taking difficult decisions was the only way forward.
“The public debt is high but its cost (servicing) is reduced drastically, its duration extended, and most importantly, it remains on a downward course,” Georgiades told the ninth Nicosia Economic Forum. “The aim is to limit it to 96 per cent by the end of 2019 and under 90 per cent by the end of 2020.”
The public debt rose to 102.5 per cent in 2018 after the state issued bonds as part of the sale of the faltering state-controlled Co-op bank to Hellenic.
Georgiades has been heavily criticised over the collapse of the Co-op and a probe said he was mainly to blame for its demise. The minister has resisted calls to resign, having the support of President Nicos Anastasiades. He will step down, however, at the end of this year, but he said it was not related.
To those who worry over the rising debt, Georgiades said the judges were the ratings agencies and the international markets.
“And I remind you that in the space of a few weeks from the confirmation of the Co-op deal, one after the other the ratings agencies upgraded our country to investment grade, signaling the stabilisation of the Cypriot economy in the most meaningful way,” the minister said.
He added that markets also reacted positively, with the island’s borrowing costs dropping rapidly.
“Apparently the ratings agencies and the international investment community saw the strategically positive prospects of the Co-op and banking decisions while some at home pretend they can’t see it.”
Georgiades said the island’s banking system was now operating under an especially demanding, European-wide regulatory framework, under constant pressure, which would change the banking map across the EU.
He also mentioned the creation of a loan management entity and the reinforcement of the legislation.
“The ambitious target must be to limit NPLs that remain on bank balance sheets to single digits by 2020,” he said.
Georgiades said Cyprus must continue pushing for reforms even though it was not easy or simple.
“For example, the necessary local authority reform, through the merger of municipalities, is resisted,” he said. “But we must not give up. Nor should we be afraid of any short-term political cost.”
The government and parliament must make the necessary decisions that will secure the financial viability of local authorities and serve the public.
“This must be our approach on all matters. Not to hesitate to make difficult but necessary decisions, going against the flow if required, because it’s the only way to go forward.”