With € 3,84 billion in cash available, corresponding to about 20% of GDP, the government completed 2020, despite the particular pressure on the economy and public finances due to the coronavirus pandemic, with Finance Minister Konstantinos Petridis saying in KYPE that the strategy of maintaining high reserves will be gradually terminated with the normalization of the situation, leading to the reduction of public debt.
The maintenance of the high reserve of liquid cash is attributed to the increased government expenditures on the markets in 2020, in order to build the ammunition deemed necessary, in order for the Cypriot authorities to be able to meet the increased needs of the economy due to the pandemic, which led in three almost full months of lockdown, the under-operation of many sectors of the economy, at a time when tourism had been hit hard (tourist arrivals -84% for the whole of 2020).
"Our strategic goal from the beginning was to almost double our liquid assets due to a pandemic, without endangering either downgrades or the sustainability of public finances," Petridis told KYPE, adding that this was done to enable the government. providing support to the economy with immediate interventions when needed and comfortably, while at the same time achieving three goals. The replacement of more expensive borrowing with cheaper one, the frequent presence of Cyprus in the markets and the pumping of a small part of the coverage, something that strengthens the credibility of the country, as he said.
"If all goes well with the vaccines, we will gradually reduce the resources while reducing the debt," he said.
According to the Central Bank, cash and cash equivalents in December fell to € 3,84 billion from almost € 5 last month, due to the repayment of a € 750 million domestic bond to Hellenic Bank (in the context of SKT's sale transaction). It therefore appears that the budgetary needs of December (deficit) amounted to € 387 million compared to a deficit of € 240 million in December 2019. It is traditionally noted in the last month of the year the general government has a deficit mainly due to large payments ( such as the 13th salary).
If we take into account the first exit in the markets in 2021 with the raising of € 1 billion through the issuance of a 5-year medium-term bond (with zero interest rate), then the liquid assets amounted to € 4,8 billion (excluding the budgetary needs of January 2021 ). As stated by the Minister of Finance Konstantinos Petridis, the publications in the markets also aim at the renewal of liquidity, in order to have the stock to deal with the effects of the ongoing pandemic.
The issue results in an increase in debt to € 25,9 billion, an increase that is, however, temporary, as next April the 52-week Treasury Bill of € 1,25 billion (domestic bond) will be repaid, with the debt falls to € 24,6 billion, keeping liquid reserves at about the same levels.
According to reports from the Office of Public Debt Management (GDF), the total gross financing needs of the central government for the whole of 2021 amount to € 2,3 billion, of which € 2,1 in debt maturities (€ 1,25 billion repaid in April), and the deficit of the year budgeted at € 200 million.