Cyprus plans spending cuts to achieve a primary budget deficit lower than the level targeted by the bailed-out island’s international lenders, the finance minister said on Thursday.
Harris Georgiades said the government aimed for a primary budget deficit – which excludes the cost of debt interest – of 3.0 per cent of gross domestic product, compared with 4.25 per cent outlined in the bailout deal.
A draft budget for 2014 provides for a 10 per cent cut in net spending compared to 2013, Georgiades told reporters.
“The basic characteristic of the budget is significant savings on expenditure. We are operating in a difficult economic environment,” he said.
Cyprus agreed to a 10 billion euro aid package from the International Monetary Fund and the European Union in March after its two major banks were all but decimated by their heavy exposure to debt-crippled Greece.
For the first time in the history of the eurozone’s debt crisis, bank depositors were forced to shoulder the burden of recapitalising lenders. Bailout money from lenders is mainly geared towards fiscal needs of the island, slumped in a deep recession.
The trio of lenders from the IMF, the European Commission and the European Central Bank reported Cyprus had made good progress in overhauling its banking sector and pushing through structural reforms in its first assessment of the island state in the summer.
It is due to start a second inspection visit to Cyprus in late October. (Reuters)