Cyprus’ refinancing needs will remain within manageable levels for the coming years, well below the ten per cent of GDP threshold.
Projections estimate requirements at around three per cent of GDP in 2025 and 2026, and at approximately 4.5 per cent in 2027, according to a financial outlook report by the Finance Ministry.
The report showed that gross financing needs are expected to be approximately €1.1 billion in both 2025 and 2026, increasing to around €1.7 billion in 2027.
In addition, the ministry highlighted that the country’s cash reserves are robust, covering the next nine months of financing requirements.
For 2024, Cyprus covered its financing needs primarily through a European Medium-Term Note (EMTN) issuance in June that raised €1 billion at a nominal interest rate of 3.25 per cent and a yield of 3.31 per cent.
The bond received €9.3 billion in offers. Proceeds were used to repay an €850 million EMTN maturing in June 2024, as well as for early repayment of part of a 2028 EMTN of €149.8 million, aimed at smoothing out the debt maturity profile.
Additional funding sources included disbursements totalling €96.75 million from May to September, sourced from both the European Investment Bank (€60 million) and the Council of Europe Development Bank (€36.75 million).
The ministry also expects an additional €109 million disbursement from the European Commission by year-end, following the achievement of 37 out of 38 milestones for the second and third instalments under the Recovery and Resilience Fund.
Moreover, short-term financing continued with the issuance of 13-week Treasury Bills throughout the year, except for January and February when issuance was temporarily suspended.
The maximum issue amount was reduced from €100 million to €25 million to lower interest costs, as successive ECB interest rate hikes had driven up yields.
Consequently, the May and June issuances attracted €16 million and €21.5 million, respectively, against the €25 million target.
The weighted average yield on these bills from January to September 2024 was 3.71 per cent, up from 3.25 per cent in the same period last year.
Elsewhere, six-year government bonds for retail investors were issued through private placements, totalling approximately €9.6 million for the year to October.
These bonds feature a step-up interest rate tied to the investor’s holding period.
Meanwhile, government bond yields with maturities in 2027, 2030, 2033, 2034, 2040, and 2049 remained stable overall, with slight fluctuations linked to Cyprus’ favourable credit ratings, and ongoing geopolitical uncertainties, particularly the conflicts in Ukraine and the Middle East.
It should be noted that ECB rate cuts have cumulatively lowered the key rate by 0.5 per cent this year.
According to analysts, there is an expectation for at least one more rate cut before 2024 closes, in an effort to ease economies and mitigate potential recessions across the EU.
