Cyprus unveils roadmap to lift capital controls

A roadmap was announced Thursday to lift capital controls in force since March but without a clear timeline for when they will be scrapped, as the EU state battles its economic crisis. Under the finance ministry's terms, it could take a year or two before the free movement of capital - outside and inside Cyprus - is allowed. The eurozone's first and only capital controls were introduced when the Cyprus banking system threatened to collapse as an international troika of lenders imposed harsh bail-in terms in return for a EUR10 billion bailout ($13.3 billion). "The restrictive measures were enforced to ensure the stability of the financial system and to safeguard public order," the finance ministry said in a statement. "Cypriot authorities are committed to removing the restrictive measures and ensuring free movement of capital, as soon as conditions allow," it added. It said the troika had agreed on the key principles that restrictive measures shall remain in place only for as long as strictly necessary. And such measures would be "gradually removed" so as to safeguard financial stability. Under the agreed roadmap, the priority is to abolish restrictions on transactions within the Mediterranean island to be followed by allowing the free movement of capital abroad. But the relaxation is linked to specific milestones such as recapitalisation of the banking sector and a Bank of Cyprus restructuring. "These are instrumental in rebuilding depositors' confidence in the Cypriot banking system and helping economic recovery," said the ministry. "The restrictive measures linked to the particular relaxation stage will be removed in a step-by-step process." A senior International Monetary Fund official, Delia Velculescu who heads the IMF mission in Cyprus, said last week the island is on target and making "good progress" in implementing the bailout agreed with the European Commission, European Central Bank and IMF. As part of the bailout plan, the troika had required the winding up of the island's second-largest and bankrupt lender, Laiki, and a haircut on deposits over 100,000 euros in its struggling largest lender, Bank of Cyprus. Fearing a run on banks at the time the bailout was agreed, the authorities imposed strict capital controls that have only been partially relaxed.