BRUSSELS (Reuters) – The euro zone’s bailout fund agreed on Thursday to Cyprus repaying 6.3 billion euros ($6.9 billion) of costly loans from the International Monetary Fund, so that the country can replace them with cheaper loans from the market.

Under the European Stability Mechanism (ESM) deal, Cyprus can pay back the loans it drew from the IMF during the sovereign debt crisis before they expire, but must be ready then to repay the same amount of loans it took from the euro zone fund.

But the ESM agreed on Thursday to waive this right.

“The early repayment of Cyprus’ outstanding loan to the IMF will be beneficial for both the country and the ESM,” ESM head Klaus Regling said in a statement.

“Cyprus currently enjoys a positive market perception and favorable financing conditions. It can therefore substitute the IMF debt with financing at a lower cost and longer maturity from capital markets. That strengthens Cyprus’s debt sustainability,” said ESM Managing Director Klaus Regling.

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