Back in the troublesome 2013 the International Monetary Fund provided Cyprus with a €10 billion rescue package to save the island’s economy and banking. Nobody could have predicted that this little Mediterranean country would recover from the toughest crisis so quickly and effectively, and yet, it has just taken another step to confirm that it has a stamina and integrity by repaying this loan ahead of time. Last year Cyprus has also paid off it’s 2.5 billion euro loan to Russia, also way ahead of the agreed period.
According to Cyprus Finance Minister, the loans’ early repayment would raise credibility of the country in the eyes of investors and boost the ability to raise money from direct international investments.
This early repayment became viable through a low-interest double bond issue that yielded €1.75 bln. It secured €1 bln from a 10-year bond issued at a 0.73% rate and €750 mln from a 20-year bond raised at 1.33%. Total pledge value exceeded €13 bln, comprising the largest bid in of this type in Cyprus’ history, and the bonds were oversubscribed seven times, which “demonstrates the depth of trust that international markets show toward Cyprus’ economy”.
This proactive step covers most of Cyprus’ financing needs for 2020 as well as saves the country €15 mln in interest payments on the IMF loan. The government acted fast to take advantage of low-interest rates internationally and specialists believe the decision to take advantage of record low-interest rates to override older debt with higher interest was fiscally sound. The fact that Cyprus is able to obtain long-term loans is an indication of trust from the international market.