Nicosia and Moscow to renegotiate the loan to Cyprus

The Minister of Finance Harris Georgiades is expected to send, within the next few hours, a letter to the Russian government in order to begin the renegotiation of a Russian loan Cyprus has been granted, Acting Government Spokesman Victoras Papadopoulos told CAN today.

Called to comment on a Reuters’ report to that effect, Papadopoulos said that around mid April, the Russian government approached the Republic of Cyprus expressing the wish to change the terms of the loan agreement between the two countries.

As a prerequisite, Russia set the approval of the Memorandum and the loan agreement between Cyprus and Troika (IMF, ECB, EC). “Now that the Memorandum and the loan agreement have been approved by the Cyprus Parliament, we proceed with the renegotiation of the loan agreement with Russia”, he added.

The Republic of Cyprus seeks an extension of the loan maturity and a reduction of the interest. In addition, the government will ask for payment of the loan in installement instead of a one-off payment.

According to sources, the government will ask for a reduction of the interest rate from 4.5% percent to 2.5%.

Russia lent Cyprus 2.5 billion euro in 2011 for five years, with an annual interest rate of 4.5%.

On Μarch 25, Eurozone Finance Ministers, known as the Eurogroup, decided on a €10 billion bailout for Cyprus coupled by a bail-in by uninsured depositors. The decision provided that Cyprus` second largest lender, the Cyprus Popular Bank, will be wound down, whereas Bank of Cyprus` uninsured deposits will take losses up to 60%.

The Cyprus government concluded in early April a 10 bln euros bailout deal with the Troika (European Commission, ECB, IMF), which needs to be ratified by six national parliaments and the Eurogroup. The interest rate for the financial assistance loan is approximately 2.5% and is repayable over a 12-year period after a grace period of a decade.