The government will commission a study on how to streamline the state payroll to reflect international and European standards, Finance Minister Makis Keravnos said on Friday, as he discussed the government’s budget before plenum.

Taking the stand in parliament, Keravnos told deputies the government would take two measures aimed at containing the state payroll.

Friday’s plenum discussion marks the first budget to go to parliament under the government of President Nikos Christodoulides, where the finance minister sought to stress that amidst global uncertainty, the Cypriot economy remains resilient and strong.

He described the country’s economic performance as satisfactory but underlined “we will not be complacent.”

Commenting on the need to contain the public wage bill, Keravnos said that in the beginning of every year, the finance ministry would present to cabinet every new job opening deemed necessary.

This would be substantiated with documentation and would require cabinet’s approval.

Additionally, instructions have been issued to commission an external body to carry out a study on streamlining the state payroll on the basis of international and European standards.

“This is an important first step to ensure that in the medium and long term there is not a continuous trend of increase in the state payroll” he said.

Keravnos reiterated the government’s commitment to stable and sustainable growth in the context of fiscal discipline and financial stability. “This trifecta is also the government’s standing policy,” he said.

Ahead of the debate on foreclosures, the minister said passing the package of measures tabled by the government “will be crucial for the smooth and healthy course of our economy.”

Referring to Cyprus’ economic outlook, Keravnos said the economy is projected to expand by 2.9 per cent in 2024, compared with an estimated 2.4 per cent in 2023.

In 2025 and 2026, GDP growth is projected to amount to 3.1 per cent and 3.2 per cent, respectively.

Inflation is estimated to fall to 2.5 per cent in 2024 and will continue its downward trajectory, while unemployment will drop to 2.5 per cent in 2024, from 6.4 per cent this year, It is estimated to continue its downward trend in the period of 2025 and 2026.

Nonetheless, Keravnos noted “we recognise the fact that the coming years are estimated to be quite difficult for the global economy and the Cypriot economy as well, while in the medium to long-term a new era of challenges is expected and will be marked by phenomena of de-globalisation and changes required by the green transition, climate change and high energy prices.”

He also referred to the conflict in Gaza Strip, which strengthens uncertainty, with the government assessing the situation closely and proceeding with additional measures and initiatives.

“Cyprus is a small country with an open economy, which is based to a large extent on tourism and services and is called on to tackle challenges, such as the energy crisis, inflationary pressures and price-hikes households and small and medium-sized businesses are faced with,” he added.

The government, he said, is called on to maintain a reasonable fiscal balance, maintain a course of sustainable growth, based on reforms and constant improvement of the citizens quality of life, the minister highlighted.

According to Keravnos, in 2024 the general government balance will remain in surplus reaching 2.8 per cent of GDP, while public debt will decline to 74.7 per cent of GDP marking a reduction of 40.3 percentage points since 2020, which is the largest reduction among the EU member-states.

“This positive fiscal performance will enable us on the one hand to tackle any potential negative developments, maintaining the capacity to exert social policy, while on the other hand to respond to our European obligations, particularly in reducing the deb-to-GDP ratio,” he said.

Keravnos also noted that the 2024 state budget is premised on realistic macroeconomic projections and weighted all risks and uncertainty.

Primary expenditure (excluding debt-servicing spending) are up by approximately €1.6 billion, development expenditure mark an increase of 14 per cent, whereas welfare expenditure are up by 15 per cent, he added.

The budget, Keravnos said, earmarks €900 million on green economy and €288 million on digital transformation for the period of 2024 – 2026.

“Taking the global challenges into account we have drafted a budget of responsibility, which is called on to support the society and the economy in this difficult period, while turning our eyes to the future, he said.