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Our View: Budget may ‘lack vision’ but it is prudent

MPs debate the budget (Christos Theodorides)

After last year’s shenanigans over the state budget, which became the subject of political horse-trading before it was eventually approved in January, it was good to return to business as usual. From day one of the 2022 budget debate, it was clear there would be a majority to vote it through, the government having secured the support of Diko, Dipa and an independent deputy, apart from Disy.

Even the content of the debate returned to normality, with references to the Cyprus problem in many speeches and the familiar criticism of the government’s, supposedly mistaken priorities that is used every year. One of the standard criticisms, because for most of the parties, state-driven growth is gospel, was that the budget was miserly on development funds or that it did not have a development orientation.

This was mentioned again this year, even though the development budget was 10 per cent higher than last year. By how much should the development budget increase to satisfy opposition parties? They would be unhappy even if it increased by 100 per cent because in Cyprus, parties still see the state as a driver of growth rather than as the generator of inefficiencies, waste and market distortions that it is. Parties were united in blocking funds that would be used for privatisations.

One deputy called for the intervention of the state through tax deductions and tax incentives for businesses to hire more people and to keep jobs without pay cuts. This is the unorthodox economic thinking prevailing in the legislature which embraces the view that the state must prop up the standard of living of countless deserving groups in society. They do not seem to realise that this would reduce the funds available for the development budget, which is so important for growth.

Another universal criticism of the state budget, year in, year out, is that it “lacks vision.” How could a budget have vision? There was also an “absence of social vision” said an Akel deputy, by which he meant the government had failed to waste money. He also asserted that the budget was “dry, administrative, without long-term thinking.” Although this was meant as a criticism it perfectly described what a state budget should be.

It should be dry and administrative, without a vision other than to be within affordable boundaries. The budget deficit would be down to 1.1 per cent, the growth rate 4 per cent and the public debt down to 97.7 per cent of GDP from 104.2 per cent in 2021. It is a prudent budget that ensures growth without state profligacy. It may lack vision and a development orientation, but at this time a dry budget is what the economy needs.

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