IMF Praises Cyprus for Decision to Exit Bailout Program Early

The International Monetary Fund (IMF) praised Cyprus on Monday for its decision to end its participation in a bailout program two months early. The decision came after the Eurozone nation was able to recover its financial stability.

Cyprus had received the benefit of a rescue program given jointly by the IMF and the European Union. The program would have expired on May 14, with the loan portion from the EU institutions ending later this month.

The International Monetary Fund (IMF) praised Cyprus on Monday for its decision to end its participation in a bailout program two months early. The decision came after the Eurozone nation was able to recover its financial stability.

Cyprus had received the benefit of a rescue program given jointly by the IMF and the European Union. The program would have expired on May 14, with the loan portion from the EU institutions ending later this month.

The bailout began in March 2013, after Cyprus’s banking sector collapsed. The bailout involved a 10 billion euro aid program from the IMF, the European Central Bank, and the European Commission (approximately 13 billion U.S. dollars at the time of the loan). In exchange, Cyprus was required to begin severe austerity measures and the restructuring of its banking system. The Cyprus banks had largely suffered thanks to the economic hardships of nearby Greece, with which they did a great deal of business.

IMF Chief, Christine Lagarde, announced receiving notice of Cyprus’s early withdrawal from the program.

In a prepared statement, Lagarde said “I wish to congratulate the people and the Government of Cyprus on their accomplishments under the economic adjustment program, which has delivered an impressive turnaround of the economy during the past three years…The banking system is on a much more solid footing and workouts of nonperforming loans are accelerating, opening space for new productive lending.”

Speaking of Cyprus’s future, Lagarde added, “The fiscal position has been restored to a sustainable path, and public debt is now firmly on a downward trajectory.”

Cyprus is generally considered a developed nation, and the World Bank and IMF classify it as a “high-income economy.” It entered a financial crisis, along with a number of other, similarly afflicted European nations in 2013. Part of the radical reforms required of Cyprus by its creditors included splitting its national bank in two, creating a “bad” bank and a “good” bank.

The “bad” bank’s affairs were eventually wrapped up and the bank dissolved, while the “good” bank was absorbed into the Bank of Cyprus. After three and a half years of recession, Cyprus began experiencing growth once again in 2015. That growth allowed Cyprus to pay off its obligations and exit the bailout program several months earlier than expected.

Meanwhile, similarly afflicted economies, like Greece, continue to languish in economic uncertainty while political division has prevented the country from undertaking many of the same austerity and restructuring measures that have led to such strong recovery in Cyprus.