The EBRD’s shareholders decided in May 2014 to temporarily make Cyprus a recipient country for EBRD investments and Krkoska said the EBRD plans to invest up to €700 million in the Cypriot economy until 2020. Investments will focus on the financial sector, energy, privatisations and providing finance to projects of individual companies. Krkoska added investment could be even higher if there was sufficient demand or good projects.
The EBRD will be able to build its activities on its expertise and experience in restructuring and reform earned in a wide range of countries in the past two decades ranging from Morocco to Mongolia and Estonia to Egypt. What has prompted the EBRD’s shareholders to extend the mandate to Cyprus was the need to restructure and adjust the island’s economy following a deep financial crisis.
Krkoska, who assumed his post in Nikosia in August, is confident that the reform of the Cypriot economy will succeed: “I am optimistic and I expect that recovery will be faster and stronger than what you can see now in the crisis,” he said.
For the adjustment to succeed the restructuring of the financial sector is crucial. This is one of the EBRD’s core competencies and it has a number of tailor-made instruments at its disposal which can be applied accordingly: “We really need to see what those financial institutions need”, Krkoska said. “Is it equity, is it help with issuing securities, is it training for credit officers for different ways of lending, is there a need for a change in corporate governance?”
A central part of the international €10 billion bail-out for Cyprus is an ambitious privatisation programme which commits the island to realise sales worth €1 billion by 2016. The first state-owned enterprises to be privatised are Cyprus Telecommunications and Cyprus Ports. The EBRD, Krkoska noted, would assist the government in the process.
“We would support privatisation through equity investments at the time of privatisations. Before privatisation we could also provide a pre-privatisation loan to help enhance the value of the company to make some investments which would increase the price for the government or we could provide convertible loans, which would be converted to equity at the time of the sale.” he said.
In addition, the EBRD wants to use its involvement in the privatisation process as a means to increasing the economies competitiveness. Krkoska expects, for instance, that the privatisation in the telecoms sector will help other local companies to grow and develop.
Many of these will be small businesses which also are very much a focus of the EBRD’s attention. The Bank sees strong potential in many sectors, including tourism, which is currently held back by a lack of finance, which EBRD funds could help overcome. “We have only just started, but there is no doubt we can make a positive contribution”, Krkoska thinks.