Two measures that will contribute to the containment of the public payroll were announced by the Minister of Finance, Makis Keravnos, from the floor of the Plenary Session of the Parliament as part of his speech on the 2024 state budget.
Presenting the first budget of the government of Nikos Christodoulidis, Mr. Keravnos also mentioned that in the midst of uncertainty the Cypriot economy remains resilient and strong, to emphasize, however, that despite the satisfactory economic performance "we are not complacent".
In relation to the containment of the "inelastic expenditure" of the state payroll, Mr. Keravnos announced that every beginning of the year the Ministry of Finance will present the necessary positions to the Council of Ministers for approval, after consultation with the Ministries and Deputy Ministries, with clear documentation , while instructions have been given to assign to an external body, the conduct of a study to rationalize the state payroll on the basis of international and European standards.
"These are a first important step so that in the medium and long term there will not be a continuous trend of geometric progression of the increase of the state payroll", he underlined.
Difficult in the coming years
Referring to the macroeconomic figures, the Ministry of Finance said that the growth rate of the economy is forecast to rise to around 2,9% in 2024, compared to the forecast for growth of 2,4% in 2023, and for 2025 and 2026 it is forecast to range from 3,1% and 3,2%, respectively.
At the same time, as he said, inflation is predicted to be limited in 2024 to 2,5% and to continue its downward course in the coming years, while the unemployment rate is expected to decrease to 5,8% of the workforce in 2024, compared to 6,4 .2023% in 2025 and is projected to decrease further during the 2026-XNUMX programming period.
However, he emphasized that "we recognize the fact that the next few years are predicted to be quite difficult for the global economy as well as for the Cypriot economy, while in the medium and long term a new era of challenges is expected that will be marked by de-globalization phenomena and many changes that are required from the green transition, climate change and high energy prices."
In addition, he also referred to the crisis regarding the war in Gaza, "which amplifies our uncertainties and the Government assesses the situation on a continuous basis and proceeds with additional measures and political initiatives".
Cyprus, said the Minister of Finance, "as a small country with an open economy, which relies heavily on tourism and services, is called upon to face these challenges, such as the energy crisis, inflationary pressures and accuracy, for the households and mainly small businesses".
At the same time, he continued, as a responsible Government that implements a prudent economic policy, we are called upon to maintain a rational fiscal balance, to ensure a course of sustainable development, based on reforms and continuous improvement of the quality of life of citizens".
In relation to public finances, Mr. Keravnos said that in 2024 the fiscal balance of the General Government is expected to remain in surplus and reach 2,8% of GDP, which in absolute terms corresponds to €870,6 million, against surplus of 2,5% of GDP in 2023, while the public debt for 2024 is expected to be limited to 74,7%, as a percentage of GDP compared to 81,8% of GDP in 2023 and compared to 2020 the largest decline among EU member countries by 40,3 percentage points of GDP over a four-year period.
"These positive fiscal performances will allow us, on the one hand, to deal with any negative developments in the future, providing the possibility to exercise social policy, while at the same time to meet our European obligations in terms of fiscal rules, in particular to reduce the debt ratio in 60% of GDP in the medium term," he said.
Regarding next year's budget, the Minister of Finance said that its planning and preparation was "based on realistic macroeconomic forecasts and weighed all risks and uncertainties".
As he mentioned, the budget is characterized by fiscal responsibility, aiming at strengthening the economy and enriching the economic development model, aiming at alleviating economic and social inequalities.
Among other things, it includes an increase in primary expenditures compared to last year by approximately €1.16 billion, increased development expenditures by 14%, increased social benefits by 15%.
He also emphasized that the budget includes spending of 900 million euros for the green economy and spending of 288 million euros for the digital transformation, for the three years 2024-2026.
"Taking into account the challenges at the international level, we have drawn up a Budget of Responsibility, which is called to support society and the economy in this difficult period, while at the same time looking to the future," he said.
101 new positions with the exception of education
Mr. Keravnos also noted that the budget is characterized by restraint of employment in the public sector, despite the fact that in the initially proposed Budget the total increase in positions amounted to 52 new positions in the Budget, in the context of its amendment process, the total increase with the exception of the 604 positions related to the education sector, it reached 101.
To this end, he said, it is emphasized that the creation of the 604 positions was deemed necessary in order to reduce the number of temporary staff and, therefore, the overall employment in the public sector is maintained and the state payroll is not significantly burdened.
He explained that the 101 positions are created mainly due to the immediate need to deal with the immigration problem and other immediate needs for the purposes of the proper functioning of Departments and Services of the public sector.
"The Ministry of Finance recognizes any fiscal risks, especially those arising from inflexible spending. The Ministry of Finance and the Government are the first to identify the problem of inelastic spending and in particular the issue of the inelastic expenditure of the state payroll," he said.
Messages for disposals
In his speech, Makis Keraynos also referred to the debate that followed in the Plenary on divestments, stressing that in order to ensure financial stability, it is very important to maintain an effective framework for divestments.
"The introduction of legislative obstacles that weaken the smooth development of the divestment process", he underlined, "have the effect of reducing the value of collateral, leading to an increase in the capital needs of banks and weakening financial stability, making the entire economy more vulnerable to shocks ».
He also noted that any obstacles in the process of dealing with non-performing loans that have accumulated in the real economy are increasing the amounts owed.
Pointing out that the government tabled "an imaginative package of measures, which in the circumstances we believe is satisfactory and can provide solutions and protection to borrowers", the Finance Minister called on the legislature to show the necessary determination so that in a spirit of cooperation with the executive power, to arrive together at effective and sustainable solutions.
"With the Government's measures, priority is given to the out-of-court procedure, at the same time giving expanded powers to the Financial Commissioner and modernizing the Body of the Financial Commissioner, thus giving a strengthened protection network for vulnerable households and small businesses," he said, adding that the vote of enriched package of measures submitted by the government will be of decisive importance for the smooth and healthy course of our economy.
Source: KYPE