International lenders say Cyprus rescue on track, strict adherence to terms key to ease risks

International creditors say Cyprus' financial rescue program is "on track" but that the authorities on the small Mediterranean island nation need to stick to tough economic reforms to ward off lingering risks.

Delia Velculescu, the International Monetary Fund official responsible for Cyprus, says the Cypriot economy last year shrank noticeably less than initially feared. She even projected Tuesday that it should grow by 1 percent next year.

Cyprus last year got a 10 billion euro ($13.68 billion) lifeline from its euro partners and the IMF after authorities seized uninsured deposits in its two largest banks and imposed capital controls.

Velculesu said banks show signs of stabilization, but that they face significant problems with bad loans. She said plans to privatize state-owned enterprises must quickly move ahead.