Finance ministry freezes development projects not already started

The finance ministry has instructed government ministries and departments to tighten the purse strings, advising that they freeze development projects not already underway in a bid to shore up expenses amid the rising cost of construction materials.

In a circular distributed across the government, the ministry advised that new projects not yet included in the 2023-2025 medium-term budgetary framework should be halted.

This excludes projects that Cyprus has undertaken to implement under the national Recovery and Resilience Plan – and for which the island has commitments.

For those projects already included in the budget and/or are in progress, the ministry called for “streamlining and or redistribution” — meaning generating savings from elsewhere or putting the projects on ice altogether.

“Taking into account the observed rises in general regarding the prices of raw materials, inevitably affecting construction costs, every conceivable effort should be made to ensure that any increased expenditure fall within the pre-set ceilings…”

The ministry also set out certain potential exemptions to its advisory – payroll costs (under certain conditions); policies approved by the cabinet following the passing of the 2022 state budget; existing contracts/projects worth over €1 million that have had amendments to their contracts (for example, contracts with bus companies, maintenance services); and projects that have been awarded and have significant revisions to their cash flow.

Costs of raw materials are surging, exacerbated by supply chain disruptions following Russia’s invasion of Ukraine. Prices of metals have soared, including aluminum and steel.