The International Monetary Fund approved a US$1.33 billion (HK$10.3 billion) bailout loan for Cyprus on Wednesday and released the first US$110.7 million (HK$859.2 million) to the Cypriot government.
The loan is part of a combined US$13 billion (HK$100.9 billion) emergency financing deal set by the IMF and the European Stability Mechanism that aims to support the government as it seeks to restore balance to the ravaged Cypriot banking sector.
“It is intended to stabilise the country’s financial system, achieve fiscal sustainability, and support the recovery of economic activity to preserve the welfare of the population,” the IMF said in a brief statement.
IMF Managing Director Christine Lagarde said that stabilising the banking sector was an “immediate priority.”
“The authorities need to complete the bank recapitalisation process, including by using public funds for solvent institutions where necessary,” she added, noting that “decisive steps” would be taken to restructure weak banks.
“Temporary payment restrictions should be relaxed at a pace consistent with maintaining financial stability, while minimizing distortions to economic activity. It is important to strengthen supervision and regulation of banks and credit cooperatives, and to enhance the framework for anti-money laundering.”