The Troika will want to tick off a long list of items regarding state spending, during some tricky times, with governments worldwide opening their coffers wide to support the economy, a former finance minister told the Financial Mirror.

Following the coronavirus pandemic and the latest impact of the war in Ukraine and sanctions on Russia, creditors will look deeper into government spending.

“Times are tricky.

“Governments across the world are putting their hand in state coffers to support businesses and low-income earners, with the risk of seeing their fiscal policies derailed,” said former Finance Minister and veteran economist Michalis Sarris.

He also pointed out that times are even harder for governments to keep from falling off track, as apart from challenges posed by COVID and the war, the cost of borrowing is higher.

Sarris said that lenders would be looking into how the Cypriot economy and its banking system have been affected by COVID, the war in Ukraine, the energy crisis, and the continuous increase of interest rates by the European Central Bank.

“Cyprus is a small but open economy which can easily be affected by international developments,” said Sarris.

“International creditors will also be asking the classical questions on developments such as expectations on the economy’s growth, unemployment, public and private debt”.

The former minister noted they look at the increase in the cost of living and a jump in interest rates affecting the banking system’s drive to rid its exposure to non-performing loans.

The Troika will meet with the CEOs of systemic banks and the Central Bank of Cyprus governor.

“They will ask questions regarding banks’ capital adequacy, liquidity, profitability, NPLs, loan restructurings, divestitures and business plans to reduce operating and labour costs.”

The evolution of the former Coop Bank into a State Asset Management Company and the introduction of the Mortgage to Rent scheme will also be on the discussion agenda.

Sarris said they would also be asking questions over reforms included as prerequisites in the 2013 bailout, but have yet to be fulfilled, such as justice and local government reform.

“We had also committed to making steps toward setting up a greener economy and pushing the digitalisation of our society.

“Unfortunately, the creditors will not like our answers to those questions.”

The delegation of international creditors will consist of technocrats from the general directorates of the European Commission, the ECB and the European Stability Mechanism.

The International Monetary Fund has also sent observers who will be sitting in on sessions.

This is the first time since March 2020, when the pandemic broke out, that meetings with the Troika will be held in person.

According to the program, the Troika will meet the Deputy Minister of Tourism, Savvas Perdios, to assess developments.

They will delve into the sector’s prospects for 2022-23 and the following years.

They will also meet Commerce Minister Natasa Pilides to review the energy crisis and how authorities deal with increased costs.

There will be an evaluation of the current situation in the health sector since the implementation of the General Healthcare System and the costs involved in social provisions.

Source: Financial Mirror