International lenders said on Tuesday the Cypriot economy is on track 11 months after entering an economic adjustment program that has caused a major upheaval.
Technocrats representing the European Commission, the European Central Bank and the International Monetary Fund (IMF), collectively known as the troika, said in a statement after concluding a two-week review that macroeconomic and public finances results have been better than expected.
Cyprus was offered a 10-billion-euro (13.6 billion U.S. dollars) bailout by the Eurogroup and the IMF in March 2013, but it had to close down its second largest lender and recapitalize its primary bank by seizing almost one-half of uninsured deposits over 100,000 euros.
Cypriot banks suffered heavy losses because of their extensive exposure to the reduced down Greek debt.
Controls on bank transactions which were imposed after the bank bail-in are still in force, but Finance Minister Haris Georgiades said on Tuesday that a substantial relaxation will be announced by the end of next week.
The troika report opens the way for the disbursement of more loan money to the cash strapped eastern Mediterranean island -- 150 million euros by the European Stability Mechanism and 86 million euros by the IMF.
The report said the island's GDP contracted by 6 percent in 2013, almost 2 percentage points less below the original estimate and the sectors of tourism and services proved to be more resilient than expected.
But it also cautioned that changes in the public sector, including structural reforms of the pension system and the tax collection mechanism must be speeded up.
It further called for a quick approval by parliament of legislation regulating the privatization of publicly owned enterprises, saying it will be an important step forward to safeguard better returns and reduce the public debt.
The introduction legislation in parliament on the thorny privatization issue coincides with the prospect of a government crisis for President Nicos Anastasiades, as his junior coalition partner has hinted at pulling out of the government in disagreement with his policies on solving the long-standing Cyprus problem.
Center DIKO party said it will consider later this week all options, including breaking up the government coalition