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IMF expects Cypriot public debt to drop at slower pace

By Stelios Orphanides

The International Monetary Fund said that it expects that Cyprus will reduce its public debt at a slower pace than that forecast by the finance ministry.

The IMF, which together with the European Commission and the European Central Bank participated in Cyprus’ 2013 bailout, said in its Fiscal Monitor that it expects Cyprus’s government debt to drop to 106.7 per cent of economic output this year and 105.3 per cent in 2017 from 108.9 per cent last year. In 2018, government debt is expected to drop 101.9 per cent and to 97.9 per cent in 2019.

By comparison, the government expects public debt to drop for the first time below the 100 per cent mark in 2018.

The IMF which yesterday forecast that Cyprus’ economy will grow 2.2 per cent next year after expanding a projected 2.8 per cent in 2016, said that the government will generate a fiscal deficit of 0.5 per cent this year and 0.6 per cent in 2017, both marginally wider than the government’s forecasts. In 2018, Cyprus is forecast to post a fiscal shortfall of 0.5 per cent of economic output which will shrink to 0.1 per cent over the next three years, the IMF said.

According to the finance ministry’s fiscal policy strategic framework, the government is forecast to produce a fiscal surplus of 0.4 per cent in 2019 after posting a fiscal shortfall of 0.2 per cent in 2018.

The IMF said that government revenue in Cyprus which peaked two years ago at 39.7 per cent of gross domestic product and fell last year to 38.9 per cent, will further drop this year by more than 1 percentage point before it drops to 37.5 per cent next year. The ratio of government spending to the economy will drop this year to 38.3 per cent from 40.3 per cent last year and to 38.1 per cent next year.

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