By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE) – The International Monetary Fund (IMF) Wednesday said it has proposed a three-year SDR891 million (about €1 billion; or US$1.34 billion) loan for Cyprus; representing about 563 percent (563%) quota under the Extended Fund Facility (EFF) expected to be approved in May 2013.

Christine Lagarde, Managing Director (MD) of the IMF, in a Statement said a staff team of the International Monetary Fund has reached staff level agreement with the Cypriot Authorities on an economic program that will be supported by the IMF jointly with the European Union and the European Central Bank.

Lagarde said a combined financing package of €10 billion (about US$13 billion) is designed to help Cyprus cover its financing needs, including to service debt obligations, while it implements the policies needed to restore the health of the economy and regain access to Capital Market financing.

“The IMF’s contribution would be through a three-year SDR891 million (about €1 billion; or US$1.34 billion) loan, representing about 563 percent of Cyprus’ quota, under the Extended Fund Facility (EFF). I expect that the arrangement would go to the Executive Board for approval in early May” Lagaede said.

According to her, the Cypriot Authorities have put forward an ambitious, multi-year reform program to address the economic challenges they face.

She said the overarching goals are to stabilise the financial system, achieve fiscal sustainability, and support the recovery of economic activity to preserve the welfare of the population.

“The program builds on resolute policy steps taken recently. First, problems in the two largest Banks are being addressed upfront with an approach that avoids putting additional burden on taxpayers and contributes to putting public debt on a sustainable path: she said.

This is coming on the heels of the resignation on Tuesday of Michalis Sarris, Finance minister of Cyprus after less than five weeks in the job, as the government begins an investigation into how the country’s economy nearly collapsed last month.

Sarris, 66, was appointed to the position after Nicos Anastasiades President of Cyprus and his Conservatives supporters won general elections in February.

He told reporters that he decided to step down to not compromise the work of investigators.

Sarris is a former World Bank official who helped negotiate Cyprus‘ euro membership in 2008, has come under strong criticism for his handling of the bailout negotiations.