By Sofia Kannas
THE International Monetary Fund (IMF) is today expected to make public a report advising Cyprus against any move to freeze investor debts, a source at the Central Bank confirmed yesterday.
The publishing of the report comes just days after DIKO chief and presidential candidate Tassos Papadopoulos pledged to freeze investor debts incurred in 1999, when thousands of small investors lost millions on the Cyprus Stock Exchange (CSE).
The proposed move would see commercial banks freezing investor debts incurred by small investors during the collapse of the stock market, with the balance owed offset by raising interest rates paid on deposits which commercial banks hold at the Central Bank.
The Central Bank source told the Cyprus Mail that the IMF had warned of the perils of helping stock market investors in an IMF Consultation paper published after the completion of the organisation’s Mission to Cyprus last November.
The consultation paper, entitled ‘Cyprus-2002 Article IV Consultation, Preliminary Findings of the Mission’, was published on November 4 last year and warns:
“Strengthening legislation and enhancing supervision can help restore confidence in the stock market… (however) it is important for the government clearly to signal that stock market investment losses will not be covered ex post by the public sector or by a forced private sector bailout.”
The Consultation paper also warned that undue expectations of such an outcome would only result delaying the resolution of the crisis, encouraging “reckless risk-taking in future.”
The Central Bank source said the report released today would probably reiterate these recommendations:
“In the IMF’s view it would be unwise for anyone other than the actual investors to have to bear the cost of such losses.”
The Cyprus Mail is the only English-language daily newspaper published in Cyprus. It was established in 1945 and today, with its popular and widely-read website, the Cyprus Mail is among the most trusted news sites in Cyprus. The newspaper is not affiliated with any political parties and has always striven to maintain its independence. Over the past 70-plus years, the Cyprus Mail, with a small dedicated team, has covered momentous events in Cyprus’ modern history, chronicling the last gasps of British colonial rule, Cyprus’ truncated independence, the coup and Turkish invasion, and the decades of negotiations to stitch the divided island back together, plus a myriad of scandals, murders, and human interests stories that capture the island and its -people. Observers describe it as politically conservative.
