The International Monetary Fund (IMF) has painted a positive picture of Cyprus’ fiscal outlook, predicting significant primary surpluses and a substantial reduction in public debt, expected to dip below the Maastricht Treaty’s 60 per cent of GDP limit.

In a report released on Wednesday, the IMF’s Fiscal Monitor provided estimates of fiscal performances across several nations.

For Cyprus, the IMF expects the country to sustain surpluses throughout the projection horizon until 2028, averaging nearly 1.4 per cent.

To be specific, the IMF projects a surplus of 1.9 per cent of GDP for Cyprus this year, 1.7 per cent in 2024, and 1.5 per cent in 2025.

For the years 2026 through 2028, surpluses are estimated to be around 1.3 per cent, 1.0 per cent, and 0.9 per cent, respectively.

The IMF records substantial primary surpluses (excluding debt service expenditures) for Cyprus during the entire projection period.

This year, the primary balance is expected to reach 3.2 per cent of GDP, falling to 3 per cent in 2024, and 2.7 per cent in 2025.

For the period 2026-2028, the IMF estimates primary surpluses of 2.5 per cent, 2.2 per cent, and 2.2 per cent, respectively.

Regarding public revenues as a share of GDP, the IMF forecasts a decrease from 42 per cent in 2022 to 40.5 per cent this year, 40.3 per cent in 2024, and 40 per cent in 2025.

The estimates for the years 2026, 2027, and 2028 stand at 39.4 per cent, 39.2 per cent, and 39.1 per cent of GDP, respectively.

According to the Fiscal Monitor, after 39.8 per cent in the previous year, government expenditures in Cyprus are set to decrease to 38.6 per cent this year, rising marginally to 38.7 per cent in 2024, and then falling to 38.5 per cent in 2025.

What is more, for the period from 2026 to 2028, stability is projected at 38.2 per cent.

The IMF’s estimation for Cyprus’s gross public debt is 78.6 per cent of GDP this year, decreasing to 70.9 per cent in 2024 and 66.8 per cent in 2025.

The Fiscal Monitor highlights a further decline to 61.7 per cent in 2026, and subsequently, Cyprus’s debt is expected to fall below the 60 per cent threshold to 58.4 per cent in 2027 and 55.1 per cent in 2028.

Notably, this year’s estimates are more optimistic compared to last year’s Fiscal Outlook, mainly due to the nominal GDP increase caused by high inflation.

Last year’s Fiscal Outlook had projected Cyprus’s debt to reach 66.2 per cent at the end of the period.

Finally, gross financing needs for 2023 remain unchanged at 8.1 per cent of GDP.