Cyprus embarks on road shows to raise money

The Cyprus government has embarked on investment road shows abroad in order to raise more than EUR 1 bln in new money to plug the widening deficit and before the economic data of Cyprus worsen any further.
The road shows, which started in Brussels, will continue in Zurich and Frankfurt and are informative in nature as officials from the Ministry of Finance test investor appetite to buy debt issued by Cyprus.
Ministry officials have said the exact amount of the issue, most likely to be 10-year bonds, will be determined based on demand and pricing.
The Cyprus government is rushing to raise money to cover funding requirements of up to EUR 2.5 bln and before economic data worsen. Having missed several attempts to forecast the country’s deficit to GDP ratio, the Ministry of Finance is now relying on European Commission forecasts, which at its last appraisal of Cyprus economic conditions, forecast the deficit at 3.7% of GDP for 2009 and near 6% for 2010.
Cypriot economists, however, believe the situation is far worse than the EC estimates and are forecasting the 2009 deficit at above 5% of GDP. Opposition parties are estimating the deficit in excess of 6% of GDP.
In May 2009, Cyprus successfully raised EUR 1.5 bln through a 4-year bond issue which was heavily over-subscribed at a rate of 3.85%. The issue in May, which was initially for EUR 1 bln, was 5.5 times oversubscribed and was described as one of the major successes of Finance Minister Charilaos Stavrakis who spearheaded the international road-shows in London, Paris, Frankfurt and other EU capitals.