Cyprus restructuring on target, makes good progress

Cyprus is "on target" and making "good progress" in implementing a 10 billion euro bailout agreed with international lenders earlier this year, a senior IMF official said on Wednesday.

Delia Velculsescu, IMF mission chief for Cyprus, said the fiscal measures put in place under the plan had led to "better performance" than expected, but that there were still "high uncertainties" and that continued prudence was necessary.

Velculsescu also said that while "uncertainty remains large," the IMF sees no reason to revise its already grim forecast for the small Mediterranean country's economic performance in the coming years.

"Available indicators do not indicate that a revision to the macro economic projections underlying the programme are warranted at this time. However, uncertainty remains large," she said.

In May, the IMF said real GDP should plunge 8.7 percent this year and a further 3.9 percent in 2014, before registering a modest growth of 1.1 percent in 2015.

Veculsescu was speaking in a conference call following a two-week review mission to Cyprus by the troika of lenders -- the IMF, European Commission and European Central Bank -- in which she unveiled a joint statement on progress so far.

A successful review is a key hurdle for a further tranche of money to be released to Cyprus, which will be decided on by the troika in September.

As part of the bailout plan, the troika had required the winding up of the island's second-largest and bankrupt lender, Laiki, and a haircut on deposits over 100,000 euros in its struggling largest lender, Bank of Cyprus (BoC).

During talks with the authorities, a final deal was reached on recapitalising BoC, and the statement said there is a "clear agenda" to restructure other financial institutions, including the cooperative credit sector, before the end of the year.

However, the statement said that this process, for which it gave no details, would not involve depositors.