IMF to offer $1.3b loan to Cyprus

A man walks past a branch of Bank of Cyprus in Nicosia, in this March 31, 2013 file photo. [Photo/Agencies]

WASHINGTON - The Washington-based International Monetary Fund (IMF) on Wednesday said that it plans to offer a three-year loan program in the amount of about $1.34 billion as part of the latest global rescue program for Cyprus.

A staff team of the IMF has reached staff level agreement with the Cypriot authorities on an economic program that will be supported by the IMF jointly with the European Union and the European Central Bank, Christine Lagarde, Managing Director of the IMF, said in a statement released on Wednesday.

A combined financing package of 10 billion euros (about $13 billion) is designed to help Cyprus cover its financing needs, including to service debt obligations, while it implements the policies needed to restore the health of the economy and regain access to capital market financing, said Lagarde.

The IMF's contribution would be through a three-year 891 million special drawing right (SDR) (about $1.34 billion) loan under the Extended Fund Facility (EFF) mechanism. "I expect that the arrangement would go to the Executive Board for approval in early May," said the IMF chief.

"The Cypriot authorities have put forward an ambitious, multi-year reform program to address the economic challenges they face. The overarching goals are to stabilize the financial system, achieve fiscal sustainability, and support the recovery of economic activity to preserve the welfare of the population," she noted.

Established in 1974, the IMF's EFF mechanism is typically three years in duration and aims at providing assistance to countries experiencing serious medium-term payments imbalances due to structural impediments in production and trade.