IMF Managing Director Christine Lagarde has praised the Cyprus authorities for keeping the rescue programme implementation on track, pointing out that the ongoing fiscal adjustment should be complemented by structural reforms.
Lagarde was speaking to the press on Friday, following the executive board discussion during which the members completed the third review of Cyprus’s performance under an economic programme approving the disbursement of about 83.3 mln euros. This brings total disbursements to 333.2 mln of the IMF’s total commitment of 1 bln euros.
"While the macroeconomic outturn in 2013 was better than expected, the outlook is challenging. Full and timely policy implementation, broad public acceptance, and continued support from the European partners remain critical," she pointed out.
In her statements Lagarde said that significant progress has been made in the financial sector, notably the recapitalisation and consolidation of the cooperative credit sector, adding that going forward, full implementation of banks’ and coops’ restructuring plans and strong governance "are essential to further bolster confidence".
The IMF chief also noted that the successful resumption of credit and output growth depends critically on progress with reducing non-performing loans, adding that "prompt implementation of a strong insolvency framework is necessary to provide adequate incentives for voluntary debt restructuring negotiations."
She also said that prudent fiscal policies have contributed to permanent budgetary savings and reduced the budget deficit, adding however that "in light of persistent macroeconomic uncertainty, cautious budget execution will need to be maintained this year."
"The ongoing fiscal adjustment should be complemented by structural reforms to enhance the welfare system and protect vulnerable groups, modernise the revenue administration, further strengthen public financial management, and prepare state-owned assets for privatisation," the IMF chief said.
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