Thursday, May 16, 2013

IMF board OKs Cyprus loan, warns of risks

The International Monetary Fund's executive board approved a $1.3 billion, three-year loan to Cyprus on Wednesday, part of a larger international bailout to help the Mediterranean country avoid defaulting on its debt.

But IMF Managing Director Christine Lagarde said Cyprus's bailout was subject to "substantial risks," as the economy is likely to contract for the next two years.

"The macroeconomic outlook is subject to high uncertainty and risks to the program are substantial," Lagarde said in a statement. "There is no room for implementation slippages. Full and timely implementation of the program is critical to maintain credibility and achieve the program's objectives."

Cyprus had to comply with certain conditions - including winding down its second-largest bank and imposing losses on large depositors