Fiscal Council calls upon government to maintain debt-deficit trend, starting with 2025 budget
09:10 - 30 November 2023
The Fiscal Council of Cyprus has called on the government to strictly maintain its course of debt and deficit as included in the 2024 budget, during the following ones, beginning from 2025.
The Council consists of three members, appointed by the Council of Ministers after consultation with the Parliamentary Committee on the Finances and the Budget of the House of Representatives, one of which acts as full-time Chairman.
According to its website, the Council's mission is the "timely and effective public intervention aimed at the avoidance of a fiscal derailment that will entail the adoption of socially painful measures, and that could be avoided by effective fiscal management that includes counter-cyclical and macro-prudential policies."
In its most recent report, the Council notes that the 2024 budget maintains the course of surpluses, both primary and overall, as well as the subsequent reduction of the public debt in the long term.
It adds that achieving the 60.1% target (as a percentage of GDP) for the debt within the horizon of the medium-term fiscal framework is deemed as being particularly difficult. No debt increase is expected, assuming that the weighted yields of the new debt will not exceed the limit of 3.8%, the Board of Directors says in its November 2023 report, which was made public on 29 November.
It underlines that the trajectory of the debt is satisfactory, but is also subject to significant risks and adds that, combined with the increase in inflexible spending, concern has been raised about maintaining the necessary fiscal flexibility to implement policies or deal with unforeseen circumstances within the next three years.
The Council’s report notes that keeping the Republic of Cyprus on the road map for the course of debt presented in the medium-term fiscal framework 2024-2026 is able to put Cyprus on a safe path in terms of its fiscal health.
Furthermore, it notes that for this reason "it will be extremely important to maintain the course prescribed in the medium -term fiscal framework 2024-2026 without revisions of fiscal targets in the 2025 state budget that will be submitted next year.”
In its report, the Council also says that the overall digital reform of the state apparatus is a significant priority which 'is absent from the plans' and calls on the Ministry of Finance and the House of Representatives to exercise stricter control over the estimates for the expenditure of Emission Rights and fuel in the budget of the Electricity Authority Cyprus which constitute "an important macroeconomic weakness for the country."