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Fiscal resources should be used sparingly until Covid clears, council says

Fiscal Council chief Demetris Georgiades

Fiscal resources should be used sparingly until the situation with the coronavirus pandemic cleared, the island island’s fiscal council said on Thursday.

In its Spring report, the council said that amid the uncertainty created by the pandemic forecasts and fiscal planning should be frequently reviewed and readjusted depending on new developments.

“In the meantime, and until the scene cleared regarding the development of the Covid-19 pandemic, and considering the state of economic activity, fiscal resources should be used sparingly,” the council said.

Government support should only go to viable businesses facing temporary cashflow problems and households that are in dire need, the report added.

“The state should keep a reserve having in mind the emergence of a new need for intervention at a later stage,” the council said, striking a note of caution against complacency because of the favourable course of the pandemic.

The government must also keep in mind the possibility of the public debt rising to unsustainable levels, it said.

“Potential reduction in Cyprus’ productivity or possible rise of interest rates would have a negative effect on the capability of servicing the debt and that is why it must be kept at the lowest level possible.”

The council reiterated the need for the necessary reforms to go ahead, something that the unexpected crisis highlighted once more.

“The creation of a different, competitive and flexible economy, without high public and private debt, limited bureaucracy and strong as well as effective state institutions, should be the main objectives of planning for the future.”

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