Nicosia: The picture of public finances is very satisfactory, Fiscal Council Chairman, Michalis Persianis told the Parliamentary Committee of Finance on Monday, at the start of the discussion on the 2026 state budget. However, he warned of external risks and potential expenditure that may cause uncertainty and could derail public finances.
According to Cyprus News Agency, Persianis stated that the Fiscal Council’s assessment of the budget assumptions was positive, noting that the fiscal indicators are extremely satisfactory. He extended congratulations to the Ministry of Finance, particularly for achieving the 60% target level of public debt. Despite these accomplishments, Persianis highlighted numerous risks and uncertainties, emphasizing that external risks and potential expenditure could significantly impact the Medium-Term Fiscal Framework.
Persianis expressed concerns about inflexible expenditure consuming a significant portion of the budget, which he described as a trap leading to a procyclical policy. He warned that such a policy could be dangerous if the economic climate changes, an event he believes is inevitable. Furthermore, Persianis pointed out that Cyprus is currently in expenditure excess, posing a high risk to correcting the fiscal trajectory as per the EU’s economic governance rules.
He reassured, however, that as long as the national debt remains below 60%, it is unlikely that corrective measures will be enforced against Cyprus. While he acknowledged that this year’s plan to address the excess is better than the previous year’s, it still carries a high risk in terms of implementation. Lastly, Persianis noted that the current Medium-Term Fiscal Framework is following a more realistic path, suggesting a cautious optimism concerning Cyprus’s fiscal future.