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IMF releases 84.7 mn euros in bailout funds to Cyprus

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(Globalpost/GlobalPost)

The International Monetary Fund approved Monday the release of 84.7 million euros ($113.1 million) in bailout funds to Cyprus.

The IMF executive board gave the go-ahead for the release after completing the first review of Cyprus's performance under a three-year, billion-euro loan program the IMF extended in May, the IMF said in a statement.

With the new disbursement, Cyprus will have received about 169.4 million euros ($226.2 million) to date under the lifeline extended on May 15.

The loan, known as an Extended Fund Facility arrangement, is part of a combined 10-billion-euro financing package with the European Stability Mechanism, the European Union's financial emergency fund.

The IMF board also approved the Cypriot authorities' request for modification of performance criteria on September 2013 fiscal targets, the Washington-based institution said.

The country plunged into crisis in 2012 as Greece's meltdown spilled over, leaving a number of its top banks insolvent and forcing depositors to accept reductions in the value of their bank accounts.

To get the loan package, the government had to take over major banks, agree to large spending cuts and tax hikes, and the sale of some state-owned assets.

"The Cypriot authorities have made commendable progress in implementing near-term stabilization policies. They remain committed to taking further steps to restore financial stability and the sustainability of public finances to support long-run growth," said the IMF managing director, Christine Lagarde, in a separate statement.

Cyprus was on track to meet its 2013 fiscal targets, she said, thanks to the significant consolidation under way and prudent budget execution.

But, she cautioned, "Given still high macroeconomic uncertainty, continued fiscal prudence is called for."

Lagarde noted the authorities had made strides in improving the troubled banking sector, including the recapitalizaton of the two largest banks without the use of public support.

"Steps are being taken to recapitalize and restructure remaining solvent banks and the cooperative credit sector," she said.

"The authorities will also strengthen the supervision and regulation of these institutions, and ensure the full implementation of the anti-money laundering framework by banks."

On July 31 the IMF, European Central Bank and European Commission said in a review that the restructuring program was on track.

"The authorities have taken decisive steps to stabilize the financial sector and have already been gradually relaxing deposit restrictions and capital controls," it said.

However, it added, the short-term economic outlook was poor, with output projected to contract 13 percent in 2013-2014.

Economic growth is only expected to recover in 2015.

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http://www.globalpost.com/dispatch/news/afp/130917/imf-releases-847-mn-euros-bailout-funds-cyprus-0