ΙMF Executive Board approves 1 billion euro arrangement for Cyprus

The Executive Board of the International Monetary Fund (IMF) approved today a three-year SDR 891 million (about €1 billion, or US$1.33 billion; 563 percent of the country’s quota) arrangement under the Extended Fund Facility (EFF) for Cyprus in support of the authorities’ economic adjustment program.

According to an announcement of IMF, the approval allows for the immediate disbursement of SDR 74.25 million (about €86 million, or US$110.7 million).

The EFF arrangement is part of a combined financing package with the European Stability Mechanism (ESM) amounting to €10 billion. It is intended to stabilize the country’s financial system, achieve fiscal sustainability, and support the recovery of economic activity to preserve the welfare of the population.

Cyprus, divided since 1974 when Turkish troops invaded and occupied its northern third, has agreed with international lenders on 10 billon euro aid package, under which, it must close down the Popular Bank, and impose painful losses on deposits of more than 100,000 euros held at the euro zone state`s biggest lender, Bank of Cyprus. Both institutions were heavily exposed to the Greek debt.

The Board of Directors of the European Stability Mechanism approved Monday the Financial Assistance Facility Agreement and the disbursement of the first tranche of financial assistance to Cyprus. The first tranche is transferred in two separate disbursements: the first – of €2 billion was transferred Monday, and the second –of up to €1 billion will be transferred before 30 June 2013.