NICOSIA, Feb. 6 (Xinhua) -- The Board of Directors of the European Stability Mechanism (ESM) has given its consent to the early repayment by Cyprus of the remaining part of an International Monetary Fund (IMF) loan, which was part of the 2013 bailout of the eastern Mediterranean island, according to a ESM press release on Thursday.
The IMF contributed one billion euros (1.1 billion U.S. dollars) to the 10-billion-euro bailout offered by the Eurogroup, which pulled Cyprus off the brink of bankruptcy after it was shut out of markets in 2011, Cyprus News Agency (CNA) reported.
Under the terms of the bailout agreement, if Cyprus opted to repay early any of its lenders, it had to repay in full the remaining part of its debt to all lenders.
Without the ESM's consent, Cyprus would have had to repay early the remaining part of its ESM loan, which amounts to 6.3 billion euros.
The ESM statement said that the Board of Directors "agreed today to waive Cyprus's mandatory repayment obligation of ESM loans in connection with its early repayment to the International Monetary Fund."
The statement quoted ESM Managing Director Klaus Regling as saying that the early repayment by Cyprus "will be beneficial for both the country and the ESM."
"Cyprus currently enjoys a positive market perception and favorable financing conditions. It can therefore substitute the IMF debt with financing at a lower cost and longer maturity from capital markets," Regling said.
The remaining part of Cyprus's debt to the IMF stands at 691 million euros,according to the CNA.
Phaedon Kalozois, head of Cyprus's Public Debt Management Office, said recently that the interest rate of the IMF loan stood at 1.99 percent, while the Republic of Cyprus was currently able to borrow from the markets at a cost of one percent.
Cyprus's intention to repay early its IMF debt was announced by former Finance Minister Harris Georgiades when he presented his last budget to parliament in December.
He said at the time that following the early repayment of the remaining part of a 2.5-billion-euro Russian loan, Cyprus was also planning to repay early the remaining part of its IMF debt.
He also said that the early repayment of the IMF debt would reduce sovereign debt to 91.1 percent of Cyprus's gross national product (GNP), which stood at 22 billion euros at the end of 2019. (one euro = 1.10 U.S. dollars) Enditem
