Cyprus finance minister says money restrictions to be ‘significantly eased’ from next week

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NICOSIA, Cyprus – Cyprus’ finance minister said Tuesday that money transfer restrictions imposed on banks after the country’s financial rescue agreement last year will be “significantly eased” from next week.

Harris Georgiades didn’t specify which restrictions will be relaxed, but he said an easing had become possible because the troubled banking sector is stabilizing.

Cypriot banks bore the brunt of a 10-billion-euro ($13.7 billion) rescue that the country received last March from its euro partners and the International Monetary Fund. In return, Cypriot authorities seized large chunks of uninsured deposits in the country’s two biggest banks — the Bank of Cyprus and the now-defunct Laiki Bank — and imposed capital controls to head off a run.

Restrictions have been loosened since then to keep business running, but many remain, including daily cash withdrawal limits of €300 ($410) and a ban on cashing checks.

Lifting restrictions is considered key to jump-starting an economy mired deep in recession. Cypriot authorities had said most would be lifted early this year, with the last being uncontrolled money transfers abroad.

Georgiades’ remarks came as international creditors said the country’s rescue program was “on track.”

“The Cypriot economy’s program of reform is in full swing and the progress that has been achieved is deemed as significant,” Georgiades said.

But creditors pointed to lingering risks authorities need to keep at bay by pushing ahead with economic reforms.

Delia Velculescu, the International Monetary Fund official responsible for Cyprus, said the Cypriot economy last year shrank noticeably less than initially feared thanks to the “resilient” services and tourism sectors and stronger-than-expected consumer spending.

Although the economy will shrink 4.8 per cent this year, Velculescu said it should grow 1 per cent next year.

Velculesu said banks still face significant problems with bad loans and that plans to privatize state-owned enterprises must quickly proceed.

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