EBRD Head of Cyprus and Greece Andreea Moraru shares her thoughts about the Bank’s work on the island
After six years of working in Cyprus, with close to €600 million of investment and more than 270 small businesses supported, as well as numerous events and policy engagements, the EBRD’s mandate in the country is coming to an end this year.
There have been many successful projects in sectors such as financial institutions, small businesses, the green economy and trade finance. Here are five things to know about our work in the country.
- How and why we started to work in Cyprus
It all began with a request from the Cypriot authorities for the EBRD’s support in the aftermath of the 2008 financial crisis. This support, they said, would “represent a positive contribution to efforts to reform and restructure the Cyprus economy”.
At the EBRD Annual Meeting and Business Forum in Warsaw in May 2014, the Board of Governors gave the green light to a temporary expansion of the Bank’s activities to Cyprus to support the country's economic adjustment programme. It was assumed that the Bank would not engage in new operations in Cyprus after the end of 2020.
The Cypriot economy was in a very difficult situation when the EBRD began its operations. A banking crisis had led to a deep recession. Half of all loans were non-performing and unemployment was in the double digits.
Since then, there has been a remarkable turnaround. Solid growth from 2015 led to falling unemployment. Meanwhile, careful management of public finances and progress in structural reforms consolidated the economy.
The EBRD contributed with investments, engagement in policy reform and the provision of training and advisory services. In May 2017, the Bank held its Annual Meeting and Business Forum in Cyprus.
In 2020, the Covid-19 pandemic has brought a sharp economic downturn, as it has elsewhere, but there is every prospect of a strong recovery in 2021 if the pandemic subsides and social distancing rules can be relaxed.
- Working with financial institutions
The EBRD moved swiftly, with its initial investments aiming to stabilise the crucial financial sector. More than 60 per cent of the Bank’s investments in Cyprus are in this sector.
The first step, in July 2014, was to invest up to €120 million in Bank of Cyprus, as part of a €1 billion capital raising by the country’s largest financial institution to support the restructuring and stabilisation of the lender. As the largest bank on the island, the performance of Bank of Cyprus is highly correlated with economic activity in the country. The stabilisation and successful restructuring of the institution was critical for the full recovery of the economy and the financial sector.
Months later, in December 2014, the Bank opened a resident office in Cyprus.
In 2015, the EBRD bought an equity stake in Hellenic Bank, the second-largest commercial bank in Cyprus, investing €20 million in newly issued shares.
- Supporting small businesses
A milestone of the EBRD’s work in Cyprus was the launch of our Advice for Small Businesses programme in November 2015.
Small and medium-sized enterprises (SMEs) were critical to getting Cyprus back on a path of solid growth. The island has many dynamic SMEs that needed better access to long-term funding and working capital. They could also benefit from assistance to strengthen their marketing operations and efforts to innovate.
Many small firms also required support to put in place managerial and corporate governance structures as they grew.
The EBRD’s programme in Cyprus offered these services, aiming to make local SMEs more competitive and to assist with the introduction of new products and processes. Experienced business advisers and local consultants helped local companies to adapt to the demands of a globalised economy.
In total, the EBRD supported more than 270 SMEs across the whole of the island. Projects benefited from donor funding provided by the European Union, the European Regional Development Fund, the EU Aid Programme for the Turkish Cypriot community, Cyprus, and EU Programme Support Action (PSA).
One of these SMEs is the flour producer Hadjigiorkis Flourmills, which benefited from local and international advisory projects co-funded by the EU’s European Regional Development Fund.
- Promoting the green economy transition
The EBRD’s work in Cyprus also supported renewables and the decarbonisation of the island.
In 2016, the Bank provided a €10 million loan for the construction and operation of five solar photovoltaic parks with a total capacity of 11.9 MWp. The plants produce more than 21,420 megawatt-hours per year of clean energy, saving more than 15,470 tonnes of CO2 emissions every year.
In 2020, the EBRD provided a €80 million loan to ETYFA, the Natural Gas Infrastructure Company of Cyprus, for the acquisition of a floating storage and regasification unit and the development of related infrastructure. The project, supported by the EU and the European Investment Bank, is a critical component in the energy strategy of Cyprus to replace expensive and polluting heavy fuel oil with cleaner natural gas.
- Boosting trade finance
Building on the island’s history as a trading post, the EBRD rolled out its Trade Facilitation Programme (TFP) in Cyprus as early as in 2015. The support offered under the programme to promote foreign trade was in strong demand from local exporters and importers.
Today, Cypriot banks are among the most active participants in the EBRD’s Trade Facilitation Programme. The banks’ activities play a crucial role in the reintegration of Cyprus into global trade flows. Under the TFP, €350 million have been channelled to local banks in more than 650 transactions.
Through trade facilities to Eurobank, Bank of Cyprus, Hellenic Bank, Alpha Bank and Turkish Bank, the EBRD issued guarantees in favour of international commercial banks, covering the political and commercial payment risk of the transactions undertaken by the banks.
However, trade requires not only financing and guarantees, but also has a physical side in the handling of goods. The EBRD supported the granting of a concession at Limassol port to a private concessionaire, which proved to be one of the great successes of the government’s reform programme.