NICOSIA, Cyprus – International creditors are back in Cyprus to measure the country’s progress in implementing the terms of its 10 billion-euro ($13.87 billion) rescue.
Officials from the European Union and the International Monetary Fund began talks with Cypriot authorities on Tuesday and will continue through May 12. Three earlier reviews found that the country’s bailout program remained on track with the government comfortably meeting fiscal targets.
Key areas that creditors will focus on will be the health of a still shaky banking sector that is grappling with a large number of bad loans, as well as progress in pushing through structural reforms.
The bailout agreed in March last year hit Cypriot banks hardest after mandating a raid on uninsured deposits in the two largest banks to recapitalize the bigger lender, while shutting down the smaller one.
The move prompted the government to impose strict capital controls on the banking sector. Most have now been lifted, except unfettered money transfers abroad, which authorities hope to eliminate by the end of the year.
The latest review coincided with a debate by lawmakers on a parliamentary committee report delving into what caused the crisis that brought the tiny, east Mediterranean country to the brink of bankruptcy.
The report cited bad decisions and poor risk assessments by bank bosses, wanton lending, rapid expansion into eastern European markets and weak supervision by the central bank.
Another, independent inquiry last year concluded that the “reckless” economic policies of Cyprus’ former president Dimitris Christofias, who ignored warnings of excessive spending and delayed bailout talks, were primarily to blame.