Russia Cyprus signed revised loan agreement

A revised Loan Agreement between the Governments of the Republic of Cyprus and the Russian Federation was signed on September 12th in Moscow by the Cypriot Minister of Finance Harris Georgiades and Russian Deputy Finance Minister Sergey Storchak.

The Loan Agreement for the amount of EUR 2,5 billion is amended so that the annual interest rate is set from 4,50% to 2,50% and the amortisation schedule consists of eight biannual installments between the years 2018 and 2021 instead of a single repayment in 2016. Hence the revised terms translate into a direct financial benefit for Cyprus of the order of EUR 160 million up to the end of the Economic Adjustment Programme and an improvement in the public debt repayment schedule. The Minister of Finance expressed the gratitude and appreciation of the Cypriot Government for the positive response of the Government of the Russian Federation and the anticipation to a further enhancement of the excellent political and economic relations between the two countries.

The issue of possible revision of the Russian loan terms has been discussed more than once in the context of the preparation of the anti-crisis program of the European Union and the International Monetary Fund for Cyprus. The Russian side repeatedly said it was ready to join assistance to Cyprus only after Cyprus reached an agreement on financial assistance with European Union partners.

In May, Cyprus received the first tranche of a 10-billion-euro rescue package negotiated with the European Commission, European Central Bank and International Monetary Fund to bail out its troubled economy and bloated banking system. The deal also involved the closure of the island’s second-biggest bank and a “hair cut” on deposits above 100,000 euros at the largest, the Bank of Cyprus.