THREE MAJOR [BUDGETARY] RISKS IN CYPRUS DUE TO THE CORONAVIRUS

 Filenews 8 October 2020 - by Theano Thiopoulou

There are three main budgetary risks facing the economy and are mainly due to the effects of the coronavirus. The first risk concerns an outbreak of the pandemic on Cypriot territory, resulting in a worsening of economic activity. The second risk relates to the challenges facing the banking sector due to non-performing loans. The third risk concerns challenges and excessive costs that may result from the un orderly functioning of the GHS and the increased flow of migrants.

To sum up the budget, the most important points worth mentioning are:

Main objectives: The proposed State budget makes it possible to implement/continue important projects and programmes (50 higher-value infrastructure projects, eGovernment projects, frequent ones). Sustainable development from the crisis caused by the COVID-19 pandemic and dealing with its economic and social consequences. Stabilisation and reactivation of the economy. Implement structural reforms to lay a sound foundation for recovery and job creation in conditions of social cohesion.

Expenditure analysis: In the three years 2021-2023€ 3,200 million is expected to be spent on development projects, social benefits €4,907.4 million, eGovernment projects €240 million, business support €565.4 million. (implementation of projects).

Where the deviation from the ceilings is due: The cost of the seconded employees of the Ministry of Health to the OKY, which amounts to €264 million. Increase of the general government contribution to the Social Insurance Fund €120 million Summary of centralised welfare to promote The Recovery and Resilience Plan of Cyprus (€100 million), increased sponsorship to the Agency of State Health Services (€70 million), summary of increased provision for contractual obligations of the Ministry of Defence €64 million. Implementation of interest subsidy plans for housing and business loans €60 million, start of implementation of a project to upgrade degraded areas – redevelopment of old Nicosia €20 million. Inclusion of provision for the implementation of the Cyprus-Greece Maritime Association Plan (4.2 million). Increased provisions for the operation of the Ministry of Innovation and Digital Policy Research (building rental, staffing, service purchase) €13 million Increased provisions due to police/firefighter/special constable upgrades €3.9m Increased provisions for foreign ministry buildings as well as for the operation of new embassies and support for the €11m (£11m) fire fighting in Mati. Increased grant to the CMO for the implementation of €6 million of infrastructure projects.

Employment policy: The 2021 budget continues to include measures to curb employment and the amount of allowances/compensation/economic benefits. Termination of the employment policy of temporary staff. The aim is to meet the needs of the public service by filling permanent posts. The non-concession of general increases and an attempt to contain other direct or indirect wage increases continues.

Due to the fact that public debt remains high, the Ministry of Finance stresses that it is absolutely necessary to maintain the ceilings (in most cases they have increased).