Cyprus gets first tranche of EUR 2.5bn Russia loan

(NICOSIA) - Debt-laden Cyprus on Thursday received the first tranche, worth 590 million euros ($760 million), of a 2.5-billion-euro Russian loan agreed to last week, the Cyprus News Agency reported.

The loan was intended "to enhance the public sector's cash flow and cover the Republic's financing needs for 2012," said the semi-government CNA.

The final agreement for the loan was signed on December 23 by Russian Deputy Finance Minister Sergei Storchak and Cyprus's Finance Minister Kikis Kazamias, CNA added.

Moscow announced in September that it was negotiating a loan asked for by Nicosia to support the holiday island's finances, which have been badly hit by the crisis in Greece and the wider eurozone, to which Cyprus belongs.

CNA gave no details on the nature of the loan, but the Russian news agency Ria Novosti referred to unconfirmed reports in September of a five-year loan, with annual interest of 4.5 percent.

In a gloomy assessment of Cyprus's economic outlook, the International Monetary Fund said last month that it expected the island to post zero growth this year and endure a modest contraction in 2012.

The IMF predicted the deficit to widen to some 7.0 percent of GDP in 2011 as measures had fallen short of target.

A munitions blast in July that knocked out the island's main power plant dealt a major blow to the economy already suffering from its exposure to Greek debt.

In a bid to reduce the cash-strapped government's bloated fiscal deficit and avert an EU bailout, the Cyprus parliament earlier this month approved an austerity package that included a two-year salary freeze for civil servants.