Finance minister presents 2024 state budget with promise of relief measures

Finance Minister Makis Keravnos delivered on Wednesday the state budget for 2024 with a promise of cost-of-living relief measures by the end of the month – and a look ahead to next year’s ‘green taxes’.

Indeed, the Cyprus Mail reported on Tuesday that a new carbon tax is on the way as part of Cyprus’ commitments to the European Union – although the government has promised some offsets.

“We want the result to be neutral,” he said on Wednesday.

The minister said both the ‘green taxes’ and offset measures will be announced by the start of next year.

Kervanos delivered the budget to House president Annita Demetriou.

“It is a surplus budget that will help keep the economy on a sustainable and developmental path,” he told Demetriou.

The budget, President Nikos Christodoulides’ administration’s first one, will also be formally submitted during the plenary session of the House on Thursday.

The 2024 budget projects a surplus of €659 million, equivalent to 2.2 per cent of the GDP. Development spending shows a 12 per cent increase on an annual basis, while social benefits are up by 15 per cent compared to 2023, reaching €2bn. Additionally, there is a restraint on public sector salaries.

Handing over the budget, the minster said that implementing the EU’s Recovery and Resilience Plan is one of its top priorities.

Referring back to the ‘green taxes’ and the planned offsets, Keravnos said that the matter is being studied by the University of Cyprus. He explained that they are reviewing the upcoming tax reform.

The restructuring accounted for in the budget is “necessary for the modernisation of the state, its structures and institutions”.

Keravnos said that, following the budget’s approval by the cabinet, its formulation took into account the current significant economic uncertainties, the substantial challenges to the economy, such as the direct impact of new sanctions on Russia and Belarus, the high inflation affecting people’s incomes, the reduced state revenue due to decreased consumption, the high interest rates hampering the country’s economic growth and the effects of increased migration flows.

“The goal of the 2024 budget and the medium-term fiscal framework for 2024 – 2026 is to address these challenges and stabilise conditions for sustainable economic growth,” Keravnos said.

A growth rate of around 2.9 per cent is projected for 2024, while for the rest of 2023, the Cypriot economy is expected to register a growth rate of 2.5 per cent.

Moreover, the unemployment rate is anticipated to drop to 5.8 per cent in 2024 from 6.5 per cent in 2023. The budget also envisages total general government revenues of €13.2 billion and expenditures of €11.8 billion, resulting in a fiscal surplus of €659 million, or 2.2 per cent of GDP.

The primary surplus, excluding debt servicing expenses, stands at €1.09 billion or 3.6 per cent of GDP.

Capital expenditures have increased by €135 million compared to the 2023 budget. The medium-term goal is to reduce public debt to 60 per cent by 2026.

For her part, Demetriou said that the House finance committee is ready to begin its review immediately. She hopes that the discussion and subsequent approval of the budget by parliament will be completed by about mid-December.