You are here

A budget to exit the memorandum

19/10/2015 11:04
Τhe House Committee on Financial and Budgetary Affairs begins on Monday the discussion on the 2016 state budget.

Cyprus Finance Minister Haris Georgiades will analyse the state revenues, the situation of the public finances and the fiscal indicators.

During today`s session, the Committee will also discuss the budget of the Ministry of Finance, the Treasury of the Republic, the Directorate General for European Programmes, and the Public Debt Management Office.

The discussion on the state budget will cover the budgets of all Ministries and public sector services and will be concluded on November 30 with the participation of the Central Bank Governor Chrystalla Giorkadji.

The budget of 2016 was prepared on the basis of the macroeconomic framework agreed under the seventh evaluation of the macroeconomic adjustment program, which provides or a growth rate of 0.5% of GDP in 2015 and 1.4% in 2016.

However, based on developments of the first half of 2015, the Ministry of Finance expects economic growth of around 1% -1.5% in real terms, for the whole year. Forecasts for the period 2016-2018 are higher compared to the lenders estimates. In particular, the Finance Ministry expects that in 2016 the economic growth will be around 1.8% (troika 1.4%) and that in 2017 and 2018 it will accelerate to around 2-2.2%.

"Fiscal policy adopted and reflected in this budget is not restrictive but neutral thus providing stimulus to the already positive growth rate of the economy through the free operation of automatic stabilizers', the Ministry of Finance reports.

The budget provides for revenues, excluding financial flows, amounting to €5.937 mn, compared with revised revenues of €5.859 mn in 2015, marking an increase of 1.3%.

Primary expenditure (excluding expenditure for servicing debt) of the budget amounts to € 6.062 mn compared to € 5.975 mn in the previous year, an increase of 1.4%. And the total budgeted expenditure of the 2016 budget, excluding repayments of loans, amount to € 6.638 mn compared with budgeted costs totaling €6.660 mn in 2015, showing a marginal decrease of 0.3%, mainly due to the reduction in interest expenditure.

Budgeted development costs will be increased by 5% in 2016 due to the inclusion of new development projects as a result of achieving budgetary targets and forecasts. Capital spending will also show an increase of 9.5% in 2016 and will amount to € 555 mn (€ 507 mn in 2015) due to the inclusion of new infrastructure projects and co-financed projects.

The cost of servicing the public debt shows a significant reduction as it is budgeted for 2016 to be reduced by 16.0% and reach € 576 mn compared to € 685 mn in 2015 due to the restructuring of the public debt. The savings of the resulting € 109 mn are channeled into development projects, tax returns to individuals and legal entities, in the purchase of medicines and consumables and for various maintenance purposes (computer equipment, buildings etc.).