Cyprus 'on track' with reforms

The flag of Cyprus flies on a beach in the Cypriot port city of Limassol on March 31, 2013. AFP AFP PHOTO/PATRICK BAZ (Photo credit should read PATRICK BAZ/AFP/Getty Images) PATRICK BAZ

NICOSIA, Cyprus Cyprus's international creditors have found that the country's reform program is on track, the country's finance minister said Thursday.

At the culmination of the second review into Cyprus' financial rescue program, Harris Georgiades said all Cypriot banks have adequately replenished their capital buffers and moved ahead with their restructuring. Public finances, he added, are meeting set targets and reforms are proceeding normally.

He said the government remains committed to fully implementing the bailout's terms and that no new measures are needed to meet fiscal targets.

But he warned that Cyprus isn't yet out of the woods and that putting the country back into a growth trajectory will require more tough decisions and steadfast adherence to the country's bailout obligations.

"Despite the progress that has been made, difficulties and problems remain and the government won't celebrate prematurely," Georgiades told reporters.

One of the biggest problems facing Cypriot banks is the growing number of bad loans which the minister said need to be restructured to ease the burden on those who are having difficulty meeting their debt obligations as well as to keep lenders healthy.

The meeting with international creditors is a regular catch-up following March's bailout of the country. In exchange for a 10 billion euros ($13.5 billion) loan from its partners in the 17-country eurozone and the International Monetary Fund, uninsured savers in the country's two biggest banks were forced to take major losses.

The seized money was used to recapitalize Bank of Cyprus which also absorbed parts of the smaller, now-defunct Laiki Bank.

Amid ebbing trust, authorities slapped capital controls such as a 300 euro-a-day withdrawal limit to prevent a run on banks. Restrictions have since been partially relaxed, but many remain.

Georgiades repeated that almost all restrictions will be removed in the first few months of next year except the movement of money abroad that isn't part of normal business activity. He said authorities will evaluate when it's best to lift that final restriction according to how banks are holding up at that time.

The finance minister said authorities clinched a 90-day extension from international creditors on formulating a plan to privatize state-owned enterprises such as the telecommunications authority.

He said a plan will be in place by next month. Cypriot authorities want the extra time to ensure that such enterprises aren't sold off on the cheap.

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