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Moody’s warns FinMin

04/04/2003 07:02
International agency Moody’s has warned the Cyprus government to restraint state payroll, as “salaries in the public sector have reported the second largest increase following the financial and business sector”. Moody’s analysts have called the Cyprus government to restructure the public service, evaluating the current and future needs so as to achieve a more efficient allocation of human resource. It is noted that on January 16, 2003 the Parliament has voted for an increase of 7.7% in the civil servants’ salary.

Cyprus in A2 rating

Despite reservations, the international agency said that Cyprus is rated A2 due to its high income per capita and the low public debt. Moody’s report is not a formal rating action.

Tax reform

With regard to the recent tax reform, Moody’s believe that “the new tax system in relation to the agreements for double taxation will strengthen island’s attraction as an EU business centre. “Labour force in Cyprus is highly educated, able to adjust in a transformable environment and develop the new opportunities offered in a modern economy”.

Trade Unions

Moody’s support that the Cyprus trade unions affect the island’s labour market in great extent, as their demands are often satisfied.

Elsewhere the agency reports that Cyprus depends on tourism for foreign exchange and its sensitiveness in the geopolitical developments of the region and the weaknesses in its financial system.

CB to decide on interest rates

The Monetary Committee of the Central Bank will determine the monetary policy of Cyprus in the face of the significant geopolitical developments and the impacts from the war in Iraq on the island’s economy.

Meanwhile, the European Central Bank yesterday left the minimum bid rate unchanged at 2.5%, while on March it cut its interest rates by 0.25%.