cyprus debt — cyprus debt — Cyprus’ public debt is expected to fall close to 50 per cent of GDP by the end of 2025, according to Finance Minister Makis Keravnos. This projection comes after a recent council of ministers meeting, reflecting an optimistic shift from earlier targets that anticipated a drop below 60 per cent by the end of 2026.
- To enhance governance, efforts are underway to align state entities with international standards, with an action plan endorsed by all ministries. A comprehensive proposal is anticipated by year-end.
Keravnos highlighted that the EU’s 2025 European Semester Spring Package assessment for Cyprus attributes this rapid debt reduction to strong economic growth, even amidst a fragile international landscape. He noted that high primary surpluses are contributing to this swift decline, which he believes will enable the government to allocate more resources towards development spending and defence.
In a positive turn, Keravnos stated that Cyprus is no longer viewed as a country with macroeconomic imbalances, thanks to improvements in both external and private debt levels. The EU report lauds the nation’s progress in diversifying its economic model, showing promising results in relation to the UN Sustainable Development Goals.
Despite these advancements, challenges remain. The report indicates a planned spending growth of 6.8 per cent for 2025, higher than the EU benchmark of 6 per cent. Keravnos acknowledged this discrepancy, suggesting it can be rectified in the 2026 budget through measures such as eliminating unnecessary public service positions and optimising staff transfers.
When addressing public payroll concerns, Keravnos described the ongoing debate as “excessive.” He clarified that the budgeted payroll for public servants in 2025 is slightly lower than previous years and that the number of central government employees has stabilised at around 12,300, with recent years reflecting a decline.
Keravnos explained that while the central government is taking steps to cut costs, EU membership necessitates the establishment of new institutions and committees, which inherently creates demand for additional staffing. He pointed out that the education and health sectors continue to attract a significant number of employees.
On the topic of the Automatic Cost of Living Adjustment (ATA), linked to government payrolls, he indicated that the Labour Ministry is managing discussions with social partners, emphasising that decisions will be made holistically, taking all aspects into account.
Keravnos also addressed several areas needing improvement, including low investment in research and innovation, which stands at just 0.29 per cent of GDP compared to 0.72 per cent in the EU. He noted that businesses often rely heavily on bank financing, creating hurdles for obtaining loans.
In response to these challenges, the government has initiated a €37.5 million Equity Fund, with €30 million sourced from the state and the remainder from private funds. This fund, managed by the European Investment Bank (EIB), has begun investing in technology start-ups. Additionally, a roadmap for the National Enterprise Development Organisation has been approved by the council of ministers and is currently under legislative consultation.
To enhance governance, efforts are underway to align state entities with international standards, with an action plan endorsed by all ministries. A comprehensive proposal is anticipated by year-end.
Keravnos acknowledged ongoing reliance on oil products for energy, alongside an absence of natural gas in Cyprus’ energy mix. Other pressing concerns include waste and water management, alongside a mismatch between market needs and available skills. The government has initiated the establishment of new technical schools this year to better align education with the demands of the labour market.
