Government may reintroduce electricity and fuel subsidies, says finance minister

Amid mounting complaints over the cost of living, the government on Thursday said it may bring back electricity and fuel tax subsidies in the near future.

Speaking to public broadcaster CyBC, Finance Minister Makis Keravnos did not rule out reinstating subsidies on electricity bills or the lower VAT rate on motor and heating fuel.

Both those forms of temporary relief ended in July, with unions, consumer advocacy groups as well as politicians calling for their reinstatement ever since.

So far, the administration has held firm, insisting that any relief measures must be targeted and not generic.

Thursday’s remarks by Keravnos suggested the government may have softened its stance.

But the economy czar qualified that any new measures to tackle the rising cost of living would come only once parliament passes the 2024 state budget. The budget got the green light from the cabinet just this week.

“I will not accept that the government does not listen to the cries of society,” the minister said. “On the contrary, because as we speak there are several measures being implemented giving relief to low-income earners and vulnerable groups.”

In a bid not to appear totally tone-deaf, the government earlier cut to zero the VAT rate on certain essential items – bread, milk, eggs, coffee, sugar, baby foods, baby and adult diapers, and female hygiene products.

But such relief steps are seen as too little, too late. On Wednesday about a dozen unions got together and urged the administration to implement a series of “anti-inflationary measures.”

These included resuming the subsidies on electricity and fuel tax, as well as expanding the list of items subject to zero VAT to meats and dairy products.

The unions also called on the government to crack down on ‘profiteering’.

“At a time when inflation is surging, it is a common phenomenon in the market, in addition to expensiveness, that there are cases of profiteering, misleading advertising and other such unfair trading practices,” read the statement.

Meantime during the same appearance on CyBC on Thursday, the finance minister mentioned that as of next year, and until 2030, Cyprus must repay to the European Union the €6.5 billion it had borrowed from the European Stability Mechanism (ESM) back in 2013 during the financial meltdown.

Quoting Keravnos, the media reported the amount owed to the ESM €6.5 billion.

The Cyprus Mail later contacted the finance ministry’s permanent secretary Giorgos Panteli, who said the figure is actually €6.3 billion.

The official said Cyprus will start repaying this loan from 2025 through to 2031.

In 2013 Cyprus got a €7.3 billion bailout – consisting of €6.3 from the ESM and €1 billion from the International Monetary Fund.

The ESM disbursed nine loan tranches from May 2013 to October 2015. The loans will be repaid from 2025 to 2031, with a weighted average maturity of nearly 15 years.

Cyprus has already repaid the IMF loan.