IMF Urges Action On Cyprus’s Non-Performing Loans

The International Monetary Fund (IMF) has urged Cyprus to take decisive action to address the persistent issue of non-performing loans (NPLs), highlighting it as a critical factor for the island’s financial stability. While commending Cyprus for its economic recovery and fiscal discipline, the IMF emphasised the need for reducing public debt and maintaining primary surpluses until the debt-to-GDP ratio falls below 60%.

Persistent NPL Challenge

Despite significant progress in recent years, NPLs remain a substantial concern for Cyprus’s banking sector. The IMF advised Cypriot authorities to leverage the newly amended foreclosure framework and the “Rent-to-Own” scheme to accelerate the resolution of these problematic loans. This is especially pertinent in the current economic climate, influenced by the repercussions of the Ukraine conflict, sanctions, and rising interest rates.

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The high percentage of NPLs poses potential risks that could undermine the country’s financial stability. Effective management of these loans is crucial to prevent adverse impacts on the banking sector and the broader economy.

Banking Sector and Economic Implications

The Ministry of Finance has echoed these concerns, noting the risks posed by the banking sector’s developments in its strategic fiscal policy framework for 2025-2028. Although strong capital positions and excess liquidity support the banking system, the persistent issue of NPLs requires ongoing attention and comprehensive solutions.

Furthermore, the IMF underscored the importance of improving oversight of semi-governmental organisations and addressing deficits in the State Health Services Organisation (SHSO). The state’s financial support for SHSO, particularly strained by the pandemic, remains a critical fiscal issue.

Strategic Recommendations

For business professionals and investors, the IMF’s recommendations highlight key focus areas within the Cypriot economy. The call for robust action on NPLs suggests opportunities for investment in financial services aimed at loan recovery and restructuring. Additionally, reforms in the healthcare sector could present prospects for private sector involvement and investment in healthcare infrastructure and services.

The IMF’s emphasis on maintaining fiscal discipline and reducing public debt indicates a stable macroeconomic environment conducive to long-term investments. Entrepreneurs and business leaders should consider these dynamics when planning their strategies in Cyprus.

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Cyprus Hits Historic Tourism Peak As Overtourism Risks Mount

by THEFUTURE.TEAM

February 13, 2026

Record-Breaking Performance In Tourism

Cyprus’ tourism sector achieved unprecedented success in 2025 with record-breaking arrivals and revenues. According to Eurobank analyst Konstantinos Vrachimis, the island’s performance was underpinned by solid real income growth and enhanced market diversification.

Robust Growth In Arrivals And Revenues

Total tourist arrivals reached 4.5 million in 2025, rising 12.2% from 4 million in 2024, with momentum sustained through the final quarter. Tourism receipts for the January–November period climbed to €3.6 billion, marking a 15.3% year-on-year increase that exceeded inflation. The improvement was not driven by volume alone. Average expenditure per visitor increased by 4.6%, while daily spending rose by 9.2%, indicating stronger purchasing power and higher-value tourism activity.

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Economic Impact And Diversification Of Source Markets

The stronger performance translated into tangible gains for the broader services economy, lifting real tourism-related income and overall sector turnover. Demand patterns are also shifting. While the United Kingdom remains Cyprus’ largest source market, its relative share has moderated as arrivals from Israel, Germany, Italy, the Czech Republic, the Netherlands, Austria, and Poland have expanded. This gradual diversification reduces dependency on a single market and strengthens resilience against external shocks.

Enhanced Air Connectivity And Seasonal Dynamics

Air connectivity has improved markedly in 2025, with flight volumes expanding substantially compared to 2019. This expansion is driven by increased airline capacity, enhanced route coverage, and more frequent flights, supporting demand during shoulder seasons and reducing overreliance on peak-month flows. Seasonal patterns remain prominent, with arrivals building through the spring and peaking in summer, thereby bolstering employment, fiscal receipts, and corporate earnings across hospitality, transport, and retail sectors.

Structural Risks And Future Considerations

Despite strong headline figures, structural challenges remain. The European Commission’s EU Tourism Dashboard highlights tourism intensity, seasonality, and market concentration as key risk indicators. Cyprus records a high ratio of overnight stays relative to its resident population, signalling potential overtourism pressures. Continued reliance on a limited group of origin markets also exposes the sector to geopolitical uncertainty and sudden demand swings. Seasonal peaks place additional strain on infrastructure, housing availability, labour supply, and natural resources, particularly water.

Strategic Investment And Market Resilience

Vrachimis concludes that sustained growth will depend on targeted investment, product upgrading, and continued market diversification. Strengthening year-round offerings, improving infrastructure capacity, and promoting higher-value experiences can help balance demand while preserving long-term competitiveness. These measures are essential not only to manage overtourism risks but also to ensure tourism remains a stable pillar of Cyprus’ economic development.

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