Cyprus to issue foreign bond in 2009)
THE government expects to go ahead with issuing a €1 billion bond in the international markets within the first half of 2009, Finance Minister Charilaos Stavrakis stated yesterday.
The whole question of the bond issue was discussed yesterday at a working lunch attended by Stavrakis and Central Bank Governor Athanasios Orphanides, together with senior Finance Ministry and Central Bank staff.
“We are in the final stages of preparing to issue a foreign bond to the value of €1 billion, which will be aimed at foreign investors and will help towards better planning of the government’s borrowing needs over the next five years”, Stavrakis said later in a press conference.
The Finance Minister said that a specific date for issuing the bond has not yet been chosen, but it is expected to be in the first half of 2009.
Asked if it is not rather risky to be tapping the international money markets for funds under current conditions, Stavrakis replied that this was the worst possible period for any government to be seeking funds in this unprecedented climate of uncertainty. But he added: “We feel that Cyprus has exceptional economic indicators both in terms of public debt and growth rate, and a very healthy banking system.”
“We discussed various alternative proposals at length, including the possibility of taking advantage of cheap liquidity from abroad, mainly through the European Central Bank, and officers of the Finance Ministry and Central Bank have undertaken to investigate these various ideas further”, Stavrakis said, declining to give further details.
He went on to say: “We are monitoring the markets on a daily basis, and our specific aim, in collaboration with the Central Bank, is to carry out this enterprise at the best possible moment”.
News of the forthcoming bond issue coincided with announcement of the Eurostat flash estimates for the fourth quarter of 2008, which were good news for Cyprus, Slovakia and Greece.
Cyprus’s Gross Domestic Product (GDP) grew 3.0 per cent in the fourth quarter compared with the same quarter of the previous year, down from 3.5 per cent for the third quarter comparison. Growth was 0.6 per cent in the fourth quarter compared with the third quarter of this year, which was also 0.6 per cent.
Speaking at a business lunch earlier this week, Stavrakis said: “At the moment we are still seeing some momentum [in GDP growth], which is largely a spill-over from the last quarter of 2008. This may continue, but on the other hand we may reach 0 per cent growth by mid-point of this year. We are hoping that the ambitious programme of public works just announced will allow us to stay close to 2 per cent growth.”
On this basis, one would expect the government to issue its bond as soon as the markets allow a decent response.
Regarding the state of the domestic economy, Stavrakis said that at the working lunch they had reviewed both the economy and the stock-market system, and “there was general agreement that there had been very good performance in 2008, and that this momentum is carrying over into the first part of 2009”.
Stavrakis also said that the Governor of the Central Bank had described the recent measures announced by the government as “economically prudent” and said that “they respond to today’s economic situation and the challenges of the Cypriot economy.”
As for the domestic banking system, Stavrakis said that they had noted that a downward trend in interest rates had begun and was expected to continue in the coming months.
According to the Finance Minister, Orphanides thinks that the Cypriot banks “remain robust, retain satisfactory capital adequacy ratios and have satisfactory liquidity at the moment”.
