FINANCE: Cyprus pays off EUR 2.5 bln Russian loan early

Cyprus has fully repaid a loan it secured from Russia in 2011, a €2.5 bln lifeline to prevent the economy from collapsing after it was shut out of international markets.

“A short while ago the Russian loan was fully paid off,” Finance Minister Harris Georgiades said on his official Twitter account, saying the remaining balance was €1.58 bln balance.

“Cyprus can now comfortably finance its needs from the international markets,” he added.

The then communist party-backed Cyprus government had negotiated a €2.5 bln loan from Moscow in 2011 as the island started feeling the effects of a financial crisis and heavy exposure of its banks to debt-burdened Greece.

The loan from Russia was restructured in 2013 after the country secured a €10 bln bail-out from international lenders and depositors at its two biggest lenders took a bail-in on their deposits.

The loan’s repayment period was extended to 2021 and the interest rate was cut to 2.5% from 4.5%.

After successful bond issues earlier this year Nicosia decided to pay off the loan in September, when the next installment was scheduled.

The move is interpreted as an effort to bring down public debt to €21.2 bln, corresponding to 100% of the country’s GDP.

The goal set for the end of the year was to bring down Cyprus’ debt down to 96% of GDP.

According to the loan agreement signed with the Russian authorities, Cyprus has the right to pay off the loan earlier than designed without facing any penalties.

With Cyprus emerging out of junk status it can now find much cheaper ways to borrow.