As borrowing has become cheaper, Finance Minister Harris Georgiades said a process has been launched for the early and full repayment of an IMF loan after settling a €2.5 bln loan from Russia before time.
“After repaying the outstanding Russian loan, we have planned and initiated the formal process for an early and full repayment of the IMF loan,” said Georgiades.
The minister presented the 2020 state budget, his last, to the House Finance Committee on Tuesday. Georgiades will stand down before the end of the year.
According to Public Debt Management Office Head, Phaedon Kalozois, the interest rate of the IMF loan stands at 1.99%, while Cyprus is currently able to borrow from the markets at an interest rate of around 1%.
On the Cyprus Investment Programme, under which investors can apply for a passport, the minister said that even if the scheme ended today, the Cypriot economy’s growth potential would remain strong and would not be affected adversely.
He noted that from 2016 to 2018, the island’s GDP grew by 15.2%, of which only 1.2% is related to construction as a result of the investment programme.
Presenting the state budget, Georgiades said that the economy will continue to grow next year.
He also said that 2019 is the fifth consecutive year to record economic growth, after Cyprus lost 11.5% of its GDP from 2009 to 2014.
During 2015-2019, GDP grew by almost 22%, standing at 4.36% on average which represents one of the strongest growth rates in the EU, Georgiades noted.
Citing new data, the minister also said that the economy will grow by 2.5-3% in 2020, with projections by the IMF, the European Commission and credit rating agencies converging at 2.9%.
Some slowdown is expected due to high growth rates recorded in previous years as well as because of uncertainty in Europe and globally.
The surplus in 2020 is estimated at 2.7%, with public revenue expected to reach close to €10 bln and spending at €9.4 bln, the Minister said.
Public debt stood in 2018 at 100.6% of GDP, down from its 2014 peak, when it reached 108%.
In 2019, public debt will shrink to 96% and in 2020 to 91%, he added, noting that the debt is “viable under every scenario.”
There are nine structural reforms before the House of Representatives, while one more in relation to the debt-to-equity swap and privatization of the Cyprus Stock Exchange will be brought before the House in 2020.
The Minister also said that transactions related to the Cyprus Investment Programme stand at around €6.7 bln with transactions calculated in the country’s GDP only if they comprise a productive, real investment.
Referring to the banking sector, the minister said that capital adequacy has tripled since 2012 while non-performing loans which remain on the balance sheets of the banks contracted to €10 bln from around €28-29 bln during their peak.
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