NICOSIA, June 8 (Xinhua) -- Cyprus has achieved "notable economic achievements" since exiting a three-year bailout program, but still faces challenges, mostly because of the high levels of private-sector debt, the International Monetary Fund (IMF) said Thursday.
The IMF executive board said in a statement made available in Nicosia that it had concluded its first post-economic adjustment program on Wednesday, almost 15 months after Cyprus ended its three-year bailout probation.
The eastern Mediterranean island was pulled back from the brink of bankruptcy in March 2013 under a 10-billion-euro (12 billion U.S. dollar) economic assistance package involving harsh austerity, which was offered by the Eurogroup and supported by the IMF.
The statement said that during the post-program months, Cyprus achieved a robust and broad-based economic growth of 2.8 percent in 2016 that supported a sharp drop in the unemployment rate.
"The fiscal primary surplus reached a sizable 2.3 percent of GDP (on a cash basis) in 2016, supported by reforms undertaken in previous years and improving cyclical conditions, and the cost of market-based borrowing by the sovereign has fallen considerably," the IMF said.
It added that the restructuring of non-performing loans which had reached close to 50 percent of total loans had also gained momentum.
"Still, the clean-up of private and public sector balance sheets is progressing slowly, and indebtedness remains very large," it added.
However, the IMF said that an expected pickup in private sector debt servicing, coupled with a write-down of debt, will gradually restore private indebtedness to a more sustainable level and improve the banking sector's financial health.
It projected a 3-percent primary surplus for Cyprus this year, (a surplus before servicing the sovereign debt), which means that Cyprus can pay the interest of its debt and try to refinance it by obtaining cheaper credit from international markets.
IMF said the primary surplus would stabilize at 2.5 percent for the 2018 to 2022 period. That will allow Cyprus to lower public debt to just over 80 percent of GDP from the present level of around 100 percent.
It said that Cyprus's capacity to repay its debt to the fund was satisfactory, but was subject to risks from the high private sector debt and a slowdown in reforms, mostly in the form of privatizing state-owned enterprises, because of objections by opposition parties.
Apart from urging a revival of the privatizing program, the IMF also recommended measures to accelerate the downward path of non-performing loans and private debt and to save income from over performance of the economy and windfall revenues.
Before issuing its report, the IMF allowed Cyprus late in May to repay IMF loans before maturity.
