Finance ministry preparing second supplementary budget

The finance ministry on Monday signalled that it was drafting a second supplementary budget for this year, even as it awaited the green light from MPs for the first such budget.

In parliament, a ministry official said they would submit a second supplementary budget around mid-June. The official could not give more details at this time.

The comments came amid a parliamentary review of the first supplementary budget for the fiscal year 2022 – €102.1 million in extra government spending.

Of the €102.1 million, €71.5 million relates to additional expenditures required to deal with the coronavirus pandemic (payouts to businesses impacted by the restrictions, vaccine purchases), and €30 million relates to needs arising due to the war in Ukraine – assistance to farmers, purchase of grains.

However, opposition party MPs requested additional details about the government outlays before they give the nod. The matter of the supplementary budget will be discussed again at the House finance committee next week.

The opposition’s stance may be a case of seeking to exert leverage on the government so that it acquiesces to proposals put forth by the parties and aimed at softening the impact of inflation.

Opposition parties have tabled three bills designed to shield households from the rising cost of living. But on Monday, senior finance ministry official Nayia Symeonidou effectively shot down the proposals, saying they would unduly burden the state treasury and besides were in breach of European Union legislation.

For instance, one of these bills calls for slashing to zero VAT on food and medicines for a period of six months. But a tax department official told MPs that EU law does not permit for VAT reductions on these types of items.

Last week the government unveiled a package of targeted measures aimed at providing some relief from inflation. Vulnerable households would continue to pay only 5 per cent VAT on electricity bills until the end of August, and everyone else 9 per cent instead of the normal 19 per cent. The reduced consumer tax on fuel will remain in place, while pensions will also increase by an average of 4.3 per cent, with 165,000 people eligible.

Main opposition Akel offered lukewarm praise to the targeted measures, but harangued the government for failing “to face the problem at its root.” Instead the party wanted “measures for restoring the purchasing power of wages, measures for eliminating incidents of profiteering and measures that would contribute effectively to dealing with rising prices of energy, fuel and necessities.”

Responding to the criticism on Monday, Finance Minister Constantinos Petrides explained that the batch of measures is intended as temporary relief to people, and can only be seen as such.

“Inflation cannot be tackled at its root,” he noted.

He also predicted that prices would continue to go up.