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Troika begins fourth review of bailed-out Cyprus economy

A delegation from the troika of international lenders on Tuesday began its fourth assessment of Cyprus's economy and troubled banking system to see whether Nicosia is meeting its obligations under the bailout.

NICOSIA: A delegation from the troika of international lenders on Tuesday began its fourth assessment of Cyprus's economy and troubled banking system to see whether Nicosia is meeting its obligations under the bailout.

Cyprus has completed three similar reviews by the troika, which is made up of the European Commission, European Central Bank and International Monetary Fund.

The latest examination will focus on bank restructuring, a proposed national health scheme and dealing with non-performing loans.

A statement from the Cyprus central bank said troika technocrats will stay until May 12 and on Tuesday there were "general discussions" on capital controls, and bank restructuring.

Last week, Nicosia lifted all major domestic capital controls, such as the cashing of cheques, put in place more than a year ago to prevent a run on the banks.

In previous reviews the government has been praised for sticking to a harsh bailout adjustment programme agreed last year with the troika.

Nicosia has said it will adhere to the bailout no matter how unpopular it is, but the troika will also look at revenue raising measures and how effective they have been.

Cypriots have endured austerity measures that have slashed private and public sector wages, while consumer taxes have also increased.

In return for 10 billion euros ($14 billion) from international lenders, the island in March 2013 agreed to wind down Laiki, its second largest bank, and impose losses on depositors in under-capitalised largest lender, Bank of Cyprus.

Depositors in the Bank of Cyprus were hit with a 47.5 per cent bail-in as part of the bailout package.

Cyprus needs to pass this assessment to receive its next tranche of bailout cash. It has already received around half the ten billion.

Nicosia says the biggest challenge now facing the troubled banking sector is clawing back bad debt.

The IMF estimates that non-performing loans at 19 billion euros represent 120 per cent of the island's GDP and around 46 per cent of all loans.

International lenders don't expect Cyprus -- suffering record 17.5 per cent unemployment and a credit squeeze -- to exit recession until 2015.

A forecast released on Monday by the European Commission estimated the economy contracted 5.4 per cent in 2013, lower than the troika's estimate of 7.7 per cent, and it will continue to shrink by 4.8 per cent in 2014 before returning to 0.9 per cent growth in 2015.

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