ANKARA

Although the Greek-Cypriot administered region in Cyprus is seeing improved economic growth, banking worries and unemployment are holding up recovery.

The central bank of the EU-member Greek-Cypriot administration noted an increase in outstanding loans in the banking system, in a report released on Tuesday.

Overall outstanding loans in the banking system rose by €453.4 million ($500.3 million) last month from the previous one, although the total decreased 1.9 per cent from the same month in the previous year, the central bank said.

Banks in the region are still saddled with an excessive amount of non-performing loans, according to a statement from the European Commission, European Central Bank and International Monetary Fund (IMF) released on Monday.

The IMF pointed out that the region's economy is recovering: "Economic recovery started in early 2015.

"Unemployment is starting to decline from still-high levels. The fiscal targets in the first half of 2015 were met with substantial margins. In addition, the authorities are making progress on their structural reform agenda," the statement said.

However, the organizations said that increasing the pace of reform will be essential if the recovery is to be sustained.

"It is a necessary condition for a sustainable stabilization of the banking system and will require further steps as a matter of priority. To this end, legislation to expedite the transfer of title deeds and to facilitate the sale of loans should be adopted as soon as possible.

“The authorities should also make all necessary efforts to effectively implement the new insolvency and foreclosure legal frameworks," the statement said.

The level of sovereign debt is still a concern, the statement continued, adding that structural reforms must be pursued.

"Continued sound public finances are needed to ensure that public debt returns to an acceptable level while steering public spending toward growth-enhancing activities. Finally, firmly moving ahead with structural reforms — including the privatization process and the public administration reforms — is critical to cement the improvements in public finances and restore sustained economic growth."

The three organizations are completing a review which could lead to the disbursement of a tranche of €500 million ($551.6 million) in bailout funds.

In return for €10 billion ($11 billion) in aid from the three organizations, the Greek Cypriot administration in March 2013 agreed to close bank Laiki, and to impose losses on depositors in the Bank of Cyprus.

Capital controls limiting withdrawals were imposed at the time, and haircuts were taken on some bank deposits.

The creditors' review now suggests that the region is emerging from economic challenges; that review is expected to be completed in September.