Cyprus seals better terms for Russia loan

(NICOSIA) - Recession-hit Cyprus said Thursday it has sealed improved terms on a 2.5 billion euro ($3.3 billion) loan it obtained from Russia in 2011.

An agreement signed in Moscow lowers the interest rate and extends the repayment period, the finance ministry said in a statement.

The rescheduling, which Cyprus had lobbied for intensively, translates into benefits of EUR160 million up to 2016.

The deal was signed by Finance Minister Harris Georgiades and Russia's Deputy Finance Minister Sergei Storchak.

The finance ministry said the loan agreement was amended lowering the annual interest rate from 4.50 percent to 2.50 percent.

Repayment will be in eight biannual instalments between 2018 and 2021 instead of a single repayment in 2016.

"The revised terms translate into a direct financial benefit for Cyprus of the order of 160 million euros up to the end of the Economic Adjustment Programme and an improvement in the public debt repayment schedule," the statement said.

In May, Cyprus received the first tranche of a 10-billion-euro rescue package negotiated with the European Commission, European Central Bank and International Monetary Fund to bail out its troubled economy and bloated banking system.

The deal also involved the closure of the island's second-biggest bank and a "hair cut" on deposits above 100,000 euros at the largest, the Bank of Cyprus.

Cyprus is now awaiting the next instalment of cash, expected to be approved by eurozone finance ministers on Friday following a visit by the troika of international lenders for a first review of the adjustment programme.