Cyprus keeps its interest rates unchanged

CYPRUS’ Central Bank kept interest rates unchanged at a monthly review yesterday, saying the current economic climate did not warrant an adjustment.

The bank’s benchmark rate is 5.5 per cent for advances and 3.5 per cent for deposits.

A rebound in domestic economic growth by 3.4 per cent year-on-year in the first quarter was encouraging despite being dogged by a wide budget deficit which has placed the island on a European Union watch list, Central Bank governor Christodoulos Christodoulou said.

Cyprus has submitted a fiscal convergence plan to Brussels pledging to cut its budget deficit by more than half to 2.9 per cent of gross domestic product at the end of 2005.

“These measures must be implemented to tidy up public finances and to avert negative consequences on public debt, inflation and the current account balance,” Christodoulou told reporters.

“It would also enable Cyprus to regain its credibility and to maintain its strategic goal of adopting the euro as soon as possible,” Christodoulou said.

The timing of Cyprus’ entry to the European Exchange Rate Mechanism (ERM2), a precursor to adoption of the euro, is widely seen as contingent on progress in trimming the government deficit and boosting revenue.

The government convergence package contains a number of controversial provisions ranging from a freeze in pay increases in the public sector to increasing the national retirement age from 60 to 63 in the civil service and from 63 to 65 elsewhere.

Government officials have set 2007 as their target for joining the single currency. Local economists in the private sector say the target may be too ambitious with 2008 or even 2009 more realistic.

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.