InsiderEconomyCyprus debt servicing manageable despite a €6.3 billion spike due to Covid

Cyprus debt servicing manageable despite a €6.3 billion spike due to Covid

Cyprus`s debt despite the €6.3 billion spike due to the Covid pandemic has managed to extend the debt’s maturity curve, rending debt servicing “comfortable,” Cyprus Public Debt Management Office (PDMO) has said in its annual report for 2020.

According to the PDMO’s annual report, Cyprus public debt in 2020 rose by 24 per cent of GDP with the Finance Ministry opting to significantly boost is cash buffers aiming to support the labour market and businesses in the midst of the economic downturn due to the coronavirus pandemic.

Cyprus public debt amounted to €24.8 billion or 118% of GDP in 2020 marked by a contraction of 5.1% of GDP, the PDMO said, noting however that due to the debt issuances of 2020 and swapping deb with longer maturities, Cyprus’ debt maturity profile was further extended to 2050.

“Despite the relatively large amount of public debt and the need for significant reduction, the debt maturity profile is smooth and the annual debt maturities are within comfortable levels and fulfill the objectives set in the Medium Term Debt Management Strategy 2020-2022,” the PDMO said.

Furthermore, the PDMO said that Cyprus net debt is estimated at 101% of GDP in end-2020, that is, excluding cash buffers that amounted €3.61 billion in the end of the year.

Furthermore, the PDMO said that its main risks, mainly refinancing risk, interest rate risk and foreign exchange risk “were affected positively both by longer term debt issuances as well as from liability management transaction executed in February 2020”.

“The EMTN issuances in 2020 with 7-year, 10-year, 20-year and 30-year tenor have certainly led to a significant improvement of the debt maturity profile, thereby increasing the weighted average maturity of debt and as result the reduction of the refinancing risk and the credit risk,” the PDMO said, recalling that Cyprus in February 2020 repaid early its debt to the International Monetary Fund amounting to €717 million.

“Due to the early prepayment of the IMF loan the floating rate debt has marked a significant reduction and the foreign exchange risk reduced to zero,” the PDMO added.

(CNA)

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