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Cyprus needs for bank recapitalization to reach up to 10 bln euros

30 November 2012 20:14 (UTC +04:00)

Baku-APA. Cyprus has prepared preliminary plans to receive up to 10 billion euros (13 billion U.S. dollars) from international lenders to recapitalize its banking system following mammoth losses on account of their exposure to the Greek debt, Central Bank Governor Panicos Demetriades said on Friday, APA reports quoting Xinhua.

Demetriades said the exact amount for the recapitalization of the banks is not yet known exactly and it will only be established when an interim report is submitted by Dec. 7 by two expert firms which have carried out a diagnostic check of the banking sector.

"Nobody actually knows yet ... a preliminary figure of up to 10 billion euros has been put on the draft Memorandum of Understanding," Demetriades said when asked by journalists whether the recapitalization amount has been decided upon.

The recapitalization loan will be part of a bigger loan estimated Cyprus is hoping to get from the European Stability Fund and the International Monetary Fund (IMF). The total loan amount is estimated at 17.5 billion euros.

Apart from the recapitalization part, about 6 billion euros will go to debt refinancing over the next few years and the rest for meeting government needs.

Demetriades could not say whether after receiving this amount the total sovereign debt of the eastern Mediterranean island will be considered by the IMF to be manageable.

"This will depend on a number of factors which have not yet been fully examined," Demetriades said.

An IMF spokesman had earlier said in New York that there are ongoing discussions with the Cypriot authorities and Eurogroup officials to find a solution in line with the sustainability of the island's debt.

The sovereign debt is estimated to rise to about 95 pecent of the 17.3 billiion euro GDP when Cyprus gets the 1.5-billion-euro loan for financing its budget and is expected to get over the borderline limit of 120 percent after receiving the banking system recapitalization amount.

Cyprus expects to get approval for its bailout program by the Eurogroup next week, but the procedure of pushing the deal through national parliaments will not allow badly needed cash to start flowing in before the end of January.