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29 April 2014

S&P’s second Cyprus upgrade to “B”

On Friday, April 24th, 2014, credit agency Standard and Poor’s raised its rating for Cyprus to “B” from the previous “B-“, their second upgrade of Cyprus since it came face to face with near bankruptcy last year, with an unhealthy banking system and over-exposure to Greek bonds, after Greece was kicked out of international financial markets.

S&P justified the second upgrade by saying that the bailed-out island of Cyprus successfully met the terms set by its foreign lenders and reduced risk to its debt repayments. In addition, they also said that they won’t hesitate to raise Cyprus’ rating again within the next 12 months, if it continued to comply with the measures outlined in the bailout plan set by the European Union and the International Monetary Fund.

A S&P recent statement said: “Cyprus appears to be meeting the terms of the Economic Adjustment Program financed by the European Stability Mechanism and International Monetary Fund, suggesting reduced risk to Cyprus’ full and timely payment of its debt service.”

At the same time, Fitch ratings revised its outlook on Cyprus from negative to stable, due to better-than-expected economic performance and stable progress in reform implementation. Fitch rates Cyprus B-, and Moody’s Investors’ Service at Caa3.

S&P agency could not oversee the fact that any escalation in the Russian – Ukraine crisis and possible sanctions imposed by G7, could hurt Russian tourism to Cyprus and therefore, would damage the island’s economic progress. Separately, a “much-wanted” Cypriot solution & reunification could increase the island’s attractiveness to foreign investors.

In a Reuters interview this month, Cypriot President Nicos Anastasiades said that Cyprus expects to return to international markets late next year, a major leap for the island which just a year ago became the first nation in the history of the euro-zone to impose capital controls to prevent a collapse of its banking system.

Article published by: ServPro Accountants & Consultants, 29 April 2014

 

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