Nicosia - The International Monetary Fund disputes investment consultancy firm Pimco`s adverse scenario on the capital needs of the Cypriot banks, heavily exposed to the Greek economy.
Pimco, which has been selected to carry out a due diligence review of the Cypriot banking sector in the context of the island`s application for financial assistance from the European Stability Mechanism, delivered its final report in late February, suggesting that the Cypriot banks will need €5.98 billion in the basic scenario and €8.86 billion in the adverse scenario in the next three years.
However, a reliable source told CNA that during a meeting between Cyprus' Central Bank Governor Panicos Demetriades and the heads of the Troika mission (European Commission, European Central Bank and International Monetary Fund), the IMF representative disputed Pimco`s adverse scenario stating it was too optimistic.
Instead, the IMF representative insisted on the Fund`s top down estimate for a capital shortfall of €10 billion to which the IMF concluded last June. This figure was included in the Memorandum of Understanding agreed between the Troika and the Cypriot authorities on November 29, 2012.
According to the same source, the Troika cited the fact that unemployment in Cyprus already reached 14.7% whereas for the purposes of the due diligence review in the adverse scenario Pimco used an unemployment rate of 14.6%.
The Eurogroup, the Euro area Finance Ministers' meeting on March 4, said it was ready to reach an agreement on a financial assistance package for Cyprus estimated at €17 billion which is roughly equal to the island`s GDP.