NICOSIA, Sept. 26 (Xinhua) -- Efforts by Cypriot opposition parties to undo key reforms to the foreclosures framework are undermining the hard-won gains in restoring macro-financial stability, the International Monetary Fund (IMF) warned in a report on Thursday.
In its 2019 survey report of Cyprus's economy following its 2013 bailout, the IMF said Cyprus has made significant progress in recovering from the financial crisis but challenges remain in sustaining the relatively robust growth momentum, including bad debts.
"In this context, the amendments to the foreclosure framework, which were recently approved by the parliament but have not entered into effect and are currently being reviewed by the Supreme Court, are a setback creating uncertainties for NPL reduction and deleveraging of the economy," the IMF said.
"Increasing external headwinds are slowing near-term growth, while a sizable debt overhang and weak productivity growth also hold back medium-term growth potential," it said.
Its warning came as Cyprus was counting the cost of the Tomas Cook collapse, which has been estimated at 50 million euros (55 million U.S. dollars) in lost income from tourism in a not so good year.
Economists also concluded that the amendments brought by the opposition are undermining the Estia (house) plan offering reductions in the dues of low-income loan owners to help them start repaying their mortgage, thus reducing the volume of non-performing loans held by banks.
They said eligible loan owners are delaying their participation in the plan, in the hope that the amendments introduced to the foreclosures and insolvency legislation by opposition parties will lead to the government offering bigger reductions of their loans.
The IMF said policies should focus on reforms to secure financial stability and raise the growth potential of the economy, diversify markets, lower NPLs and private, build bank capital buffers, reduce public debt and to increase productivity through institutional reforms.
It added that longer-term economic growth potential is hindered by weak productivity growth, reflecting financial sector weakness as well as broader institutional bottlenecks and a slow pace of technology diffusion.
"Policies should thus focus on reforms to secure financial stability and strengthen growth potential by enhancing efficiency and productivity," the IMF added.
