The National Council on the Economy is proposing the drafting of a road map on how Cyprus can return to international markets.
It also warns that lack of preparation could increase the dangers of remaining locked into a bailout programme.
The proposal is included among several contained in the council’s study on the better management of the public debt submitted to President Anastasiades.
Basic measures include reducing the debt through exchanges and creating a secondary market for state bonds which can help Cyprus emerge from the bailout programme at the right time.
More specifically the proposals are:
*The government should examine reducing the public debt by netting off the assets against liabilities through: supporting the Finance Ministry’s proposal for an exchange between the government, Bank of Cyprus and the Central Bank. Given that it reduces the total public debt and removes the riskiest responsibility of the Republic as regards a bond issue for Laiki. The ministry’s proposal is more favourable for the state than the proposed exchange of state land of €1 billion to partly pay off the €1.4b owed to the Central Bank which was agreed in the memorandum last May. An exchange can reduce the total public debt by 10% and send a very positive message to international markets.
*Privatisation of semi-government organisations and state companies can be used to deal with the debt. More specifically, privatisation allows the mutual, beneficial exchange of the public debt held by the organisations and their employee funds with shares in the privatised companies.
If necessary some of these shares can be offered at a privileged price to strategic investors, provided the government revokes its guarantees of the pension funds of the semi-government bodies.
* They propose the government set up a secondary market for government bonds issued locally. This can serve as a crucial step to Cyprus’ return to the foreign markets.
*The National Council on the Economy underlines that only in the exceptional case of the deterioration of public finances should the government ask to renegotiate bilateral loans. Most of these loans are quite favourable for the Republic.
*The council understands the need cited in the memorandum for local restructuring of the debt. However, this had not applied to all debt holders as some have been paid to the full. A list of these cases should be made public as soon as possible. Greater transparency is proposed as regards future restructuring. More specifically, the government should oblige its local creditors to accept the same restructuring deal as the others, except if serious matters arise relating to the stability of the banking sector. The basic principle of private sector involvement (PSI) is to share the burden with the tax payer who is expected to cover the biggest part of the repayment of the debt.