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06May13


Russia adds to Cyprus's financial relief with loan extension and rate cut


Russia is extending the maturity and reducing the interest on its loan to Cyprus, a document prepared by international lenders has shown.

Russia's agreement provides additional, though expected, financial relief to the island on top of a bailout by the EU and the International Monetary Fund.

Cyprus has complied with all conditions set by international lenders for the first 3bn (2.5bn) of the 10bn bailout to flow to Nicosia later in May, according to the document, drawn up by the troika, consisting of the European Central Bank, the European Commission and the IMF, on 30 April.

Russia lent Cyprus 2.5bn in 2011 for five years, at an annual interest rate of 4.5%. Extending the loan and reducing the interest will ease debt-servicing costs for Nicosia and help it regain financial stability.

The document said: "Reassurance has also been obtained from the Cypriot authorities that formal agreement has been reached between the Republic of Cyprus and the Russian Federation on an extension by two years of the maturity for the Russian loan, which will be reimbursed as of 2018, and a reduction of the interest rate from 4.5% to 2.5%."

Cyprus secured a three-year bailout from the eurozone's bailout fund and the IMF last month, becoming the fifth country in the single currency area to seek eurozone financial help as a result of the sovereign debt crisis.

"All prior actions are now compliant both on substance and on procedure," the document said.

[Source: The Guardian, London, 06May13]

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