IN 2009 the sewerage boards of Paralimni and Ayia Napa secured loans on which the interest would go up whenever Cyprus’ credit rating was downgraded, MPs heard on Thursday.
But the reverse did not apply when the sovereign credit rating was downgraded – the interest remained constant.
The loans, €50 million and €10 million, were taken out with Piraeus Bank. The terms stipulated that the interest would be bumped up by 0.25% per subsequent downgrade of the Cypriot economy.
And this raw deal, said Disy MP Annita Demetriou, came at a time when Cyprus’ creditworthiness had already tumbled a number of times. By May 2011, and after a succession of credit downgrades, Cyprus was shut out of the money markets.
MPs learned also both the finance minister and the Central Bank had knowledge of, and green-lighted, the two loans in question.
Approval from the government was necessary because the credit facilities – intended to finance sewerage works in Paralimni and Ayia Napa – were backstopped by the state.
At the time Charilaos Stavrakis served as finance minister, while Athanasios Orphanides headed the Central Bank of Cyprus.
But the dubious loans of 2009 are only the tip of the iceberg of financial mismanagement, lawmakers discovered.
In one case in Nicosia, taxpayers paid for road repairs through a small hike in their sewerage bills, even though the cost of the project should have been borne by the municipality – which local residents had already paid.
MPs also noted the peculiar arrangement whereby the heads of municipal councils also serve as the directors of the corresponding sewerage boards.
In another case, this one in Larnaca, the job of monitoring a public works project was assigned to an employee of the very contractor who landed the contract.
MPs heard that by default sewerage boards charge local residents as they see fit, without providing a breakdown as to how the money is being spent.
“When you’re raking in millions of euros, temptation sets in,” said Zacharias Koulias, chairman of the House watchdog committee.
The committee has asked sewerage boards to provide it with detailed data on their revenues and expenses, as well as indicate the cost per kilometre of sewerage pipes.
Additionally, the auditor-general has requested, in a letter dated November 9, information explaining how sewerage charges are calculated in each district.
The auditor-general’s office has for some time been scrutinizing the financial practices and dealings of sewerage boards across the country.
To date, his probe has led to a criminal trial in Paphos, still ongoing, and uncovered a series of shenanigans in Nicosia and Larnaca, which are now being looked into by police.
Inspection of the Paralimni and Ayia Napa sewerage boards has only recently begun. Limassol so far has escaped scrutiny, but it’s understood the auditor-general will shortly turn his attention there too.
