Cyprus has been a member of the European Union (EU) since 2004, and the single currency since 2008. The euro (EUR) floats freely, is fully convertible and is the second most traded currency globally after the US dollar. Despite having liberalised capital flows ahead of accession, the Cypriot government imposed temporary controls in 2013 as part of its EUR10bn financial bail-out programme. Controls on outward money flows were further eased in December 2014, and the final ones are set to be removed completely in 2015, when the economy is expected to return to positive growth.
Cyprus was one of the countries that was hardest hit by the eurozone crisis, along with Greece, Italy, Ireland and Portugal. There are no restrictions on money transfers going to Cyprus. However, unlike other troubled European economies, Cyprus introduced limited capital controls on outgoing money transfers in 2013 under its EU-IMF bailout programme, although these had largely been relaxed by year-end 2014.
Sending money out of Cyprus related to business settlements, salary payments, student tuition and living expenses is permitted, subject to certain restrictions. In December, the central bank doubled the amount of money that individuals and institutions are permitted to transfer out of the country from EUR5,000 to EUR10,000 per month. The amount that traders and other companies may transfer was raised from EUR1m to EUR2m per transaction for settlements that fall within the scope of their usual business activity. Transfers over the EUR2m threshold are still required to receive prior approval from the central bank. Finally, the amount of hard currency that individuals may carry out of the country per trip was doubled to EUR6,000.
These measures will be in effect at least through end-January 2015; capital controls are subject to change as Cyprus progresses in its bank reform programme, and we recommend consulting up-to-date central bank guidelines before seeking to transfer money out of the country. Remaining capital controls could be entirely abandoned next year as the economy is expected to grow by 0.4%, its first positive growth in three years.
Cyprus joined the EU in 2004 and adopted the euro in 2008. As such, monetary policy is set at the EU level by the European Central Bank (ECB) and applied throughout the 18-country monetary union. The Central Bank of Cyprus (CBC) is responsible for monitoring the health of the domestic financial system, ensuring the stability of the country’s foreign reserves and maintaining price stability. A separate agency, the Cyprus Securities and Exchange Commission (CySEC) supervises the foreign and domestic investment in the securities market.
The Cypriot banking sector suffered from its massive exposure to Greek debt after the onset of the global economic downturn, and particularly the eurozone crisis. The economy has contracted by over 8% since 2009, and Cyprus became the fifth country to request an economic bailout from the EU and the International Monetary Fund (IMF) in July 2012. A US$13bn bailout programme was launched in early 2013, which prompted a 2-week bank closure. IMF and EU authorities have reported that the Cypriot banking sector has successfully followed the reform programme so far, and the economy is expected to return - albeit modest - positive growth in 2015.
Cyprus has long been inhabited by people of both Greek and Turkish origin, but their coexistence has been far from harmonious. Disputes between the Greek Cypriot and Turkish Cypriot populations turned violent shortly after independence, and sporadic flare-ups continued despite the deployment of UN peacekeepers in 1964. Turkey launched a military intervention in northern Cyprus in 1974 after the Greek government sponsored an attempt to oust the Cypriot government. By 1983, Turkish Cypriots controlled the northern third of the island and declared it the Turkish Republic of Northern Cyprus, which is only recognised by Turkey.
The Cypriot government controls the southern two-thirds of the island, separated by a UN buffer zone. UN-led talks aimed at uniting the two areas re-started in February 2014. The Republic of Cyprus uses Greek as its official language and maintains strong economic, political and social ties to Greece. Despite its tumultuous history, Cyprus showed steady economic growth between 2004-2008 and became a key destination for tourism, financial services and real estate construction.
Two currencies circulate in Cyprus. The country’s official currency, the euro, is printed in denominations of EUR5, EUR10, EUR20, EUR50, EUR100, EUR200 and EUR500. Coins are available in values of 1, 2, 5, 10, 20 and 50 cents, and EUR1 and EUR2. Each national bank prints and mints its own currency, but all euro currency from any country is accepted throughout the currency zone.
In the north, the unofficial Turkish Republic of Northern Cyprus has adopted Turkey’s currency, the New Turkish Lira (TRY). One lira is made up of 100 cents, or kuruş (kr). The Turkish central bank produces banknotes in values of 5, 10, 20, 50, 100 and 200 lira and coins in values of 5kr, 10kr, 25kr, 50kr and one lira.
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