IMF holds backs Cyprus rescue cash

[Nicosia, CYPRUS] The International Monetary Fund held back 86 million euros (S$139 million) in bailout funds for Cyprus Friday after the island's parliament delayed a vote on foreclosure legislation demanded by lenders.

The money is part of a 10-billion euro package of emergency loans that eurozone member Cyprus was forced to negotiate to avoid bankruptcy early last year.

The troika of lenders - the European Central Bank, European Commission and IMF - have already disbursed several tranches of the package as the island has kept to the harsh austerity programme it had agreed to.

But conservative President Nicos Anastasiades, who has led a minority government since centre-right coalition partner DIKO quit in February, failed to get the foreclosures legislation put to a vote on Thursday.

Lawmakers postponed debate on the controversial bill until January 30 in a move that prompted the IMF to withhold the 86 million euros.

"Critical requirements for the completion of the fifth programme review are now no longer met," a fund spokesman said.

"We support the Cypriot authorities in their efforts to progress on their ambitious and far-reaching reform programme. We look forward to continued cooperation, and will agree with the authorities on next steps in the period ahead." Finance Minister Harris Georgiades expressed dismay that the bailout disbursement had been disrupted after nearly two years of painful economic adjustment.

The "unnecessary and unjustified" delay in approving the foreclosures legislation had "seriously undermined Cyprus's credibility," he said.

The bill, which would cut the legal process for foreclosing on mortgages from years to months, has been deeply controversial ever since it was demanded by lenders under the terms of its fifth review of the island's adjustment programme.

Due to the delay the sixth review has been postponed until January and it may now be further delayed.

The latest tranche amounts to 436 million euros, including the IMF's 86 million euros. The European Stability Mechanism approved the disbursement of its 350 million euros on December 8.

The lenders say the foreclosures legislation is essential if Cyprus is to get to grips with its mountain of bad debt.

Non-performing loans represent more than 50 percent of total lending, or 157 percent of the island's gross domestic product.

Cyprus has already carried out drastic reforms to its financial sector, winding up its second largest bank and imposing a 47.5 percent haircut on deposits above 100,000 euros at its biggest.

It has also implemented a harsh austerity programme that has contributed to the economy shrinking for 13 straight quarters.


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