The government paid €288m, cutting its debt to the IMF down to €700m, according to data released by the public debt management office.

The early repayment took place following the issuance of a seven-year 2.75% benchmark of €850m last June, in a bid to reduce debt servicingcosts.

The interest rate on the IMF loan was 3.52%. The remaining cash received from the bond was used to roll over more expensive bonds of a nominal value of €500m.

Both the IMF executive board and the European Stability Mechanism board of directors approved the early repayment.

Speaking to the Cyprus News Agency, an ESM spokesperson welcomed Cyprus’ early repayment as financially beneficial, noting that the approval followed the examples of Ireland and Portugal which also repaid debt to the IMF earlier.

“Following the same process as with similar requests from Ireland and Portugal, the ESM concluded that it would be financially beneficial for Cyprus and supported the plan provided that a sizeable cash buffer was maintained,” the ESM spokesman said in an emailed statement.

Building on earlier debt issuances and fiscal surpluses, the Cypriot finance ministry has accumulated a cash buffer exceeding €1bn, thus covering the island’s foreseeable financing needs until the end of 2018.

The early repayment lowers Cyprus’ debt service costs and smoothens its maturity profile, strengthening its debt sustainability and sending a positive signal to the markets about the island’s improving market access conditions.

Source: Cyprus Mail