Siena:The Fiscal Council of Cyprus, led by President Andreas Charalambous, presented an assessment of the country's economic challenges to the House Finance Committee. The discussion focused on issues related to the pension system, public expenditure, and the low implementation rate of development projects. Council member Marios Clerides was also present during the discussions on the state budget.

According to Cyprus News Agency, Charalambous addressed the impact of tax reforms, which turned out to be smaller than the University of Cyprus initially estimated. This was due to salary increases for public sector employees, which expanded the tax base despite tax reductions. Although measures have been introduced to improve tax compliance, tangible results are yet to be seen in terms of reduced uncollected taxes and improved tax collection.

Attention was given to the sustainability of the Social Insurance Fund (SIF) and the need for increased social insurance contributions. Charalambous pointed out that employing well-paid foreign nationals has currently benefited the fund. However, a significant increase in contributions is anticipated in 2029. He emphasized the urgency of introducing a second pension pillar gradually to ensure long-term sustainability, considering future demographic pressures that may challenge the current pension system.

Charalambous also discussed the importance of maintaining a low public debt to safeguard the state's ability to provide future pensions. He highlighted that with demographic changes, the ratio of workers to pensioners will decrease, necessitating a second pension pillar to sustain pension funds.

On public expenditure, the council noted the expected continuation of the downward trajectory of public debt, which allows for addressing future expenditure needs without resorting to wasteful spending. The government’s decision to stop borrowing from the Social Insurance Fund’s surpluses will balance budgets that currently show surpluses. Charalambous remarked that net primary expenditure targets were significantly exceeded, and the modest increase in the public sector wage bill projected for 2027 is temporary.

Charalambous concluded by stressing the need for more targeted social expenditure, as most current measures are insufficiently focused. The Guaranteed Minimum Income was identified as the only measure with targeted effectiveness in reducing social inequalities.