Nicosia: The 2026 budget for Cyprus has been established at £10.7 billion, excluding debt servicing costs, as announced by Finance Minister Makis Keravnos. The budget, approved by the Cabinet, is scheduled to be submitted to the House of Representatives on October 2. Keravnos described the budget as balanced and growth-oriented, with a strong focus on social cohesion and policy.
According to Cyprus News Agency, the 2026 budget and the Medium-Term Fiscal Framework (MTFF) for 2026-2028 aim to maintain a surplus, control public sector employment, reduce public debt, promote the green transition and digital transformation, create conditions for sustainable economic growth, and maintain a robust financial system. Keravnos highlighted the importance of infrastructure projects, particularly those co-financed and part of the Recovery and Resilience Plan.
Development expenditures are projected to increase by 4.7% compared to 2025, with social benefits rising by 6.7%, focusing on education, health, and social welfare. A notable inclusion is the allocation of £26 million for people with disabilities in the Republic of Cyprus’ budget. Public sector employment is set to reduce by 14 positions for the second consecutive year, with efforts to contain the government wage bill continuing.
The economic outlook for Cyprus remains positive, with growth expected at 3.1% in 2026. Unemployment is anticipated to decrease to 4.6% of the labor force. Preliminary forecasts project a fiscal surplus of 3.6% of GDP, with a primary fiscal surplus of 4.9% of GDP. Public debt is expected to decline to 52.9% of GDP in 2026, down from 57.9% in 2025, with further reductions anticipated by 2028.
Keravnos acknowledged risks from geopolitical developments and climate change impacts, emphasizing the need for prudent economic policy. Provisions have been made for the Cost-of-Living Allowance, Recovery and Resilience Plan, and natural disaster compensation. Debt servicing costs for 2026 are estimated at £1.15 billion annually until 2030, with the primary surplus directed towards public debt repayment.
The Finance Minister expressed confidence in the Recovery and Resilience Plan, noting that Cyprus has received 50% of the total funds. Tax reform bills are under review and expected to be submitted to Parliament by the end of October, with implementation slated for January 2026.