The government of Cyprus has approved the state budget for 2014 that foresees spending being reduced by 626 mln euros, while the aim is to achieve a primary budget deficit lower than that suggested by the Troika of international lenders.
Finance Minister Harris Georgiades said the government aimed for a primary budget deficit - which excludes the cost of debt interest - of 3.0% of GDP, compared with 4.25% outlined in the bailout deal agreed with the EU, the European Central Bank and the IMF.
A draft budget for 2014 provides for a 10% cut in net spending compared to 2013, Georgiades told reporters.
“The basic characteristic of the budget is significant savings on expenditure. We are operating in a difficult economic environment,” he said after a Cabinet meeting, adding that “at a time when our fellow citizens, households and businesses are cutting back on spending, it would be inconceivable for the state not to do the same.”
Georgiades has proposed a further reduction and streamlining of overtime pay for civil servants, a 3% contribution to the state pension fund, and cutbacks on other social contributions.
The draft budget sees spending, excluding treasury transactions, interest, reserves and rollover dues, of 5.599 bln euros, down from 6.225 bln in the 2013 budget, while revenues, excluding loans, is estimated at 5.639 bln euros, unchanged from the revised budget for 2013 of 5.638 mln.
The draft budget will be submitted to parliament for debate and approval over the next few days.
The Troika is due to start a second inspection visit to Cyprus in late October to review ongoing spending cuts for 2013, the restructuring of the banking sector and public sector reform, including privatisation of service providers, including telecom, electricity and the ports.
The statistical service Cystat had earlier reported that the GDP growth rate in real terms during the second quarter of 2013 is negative and estimated at -5,9% over the corresponding quarter of 2012.
Νegative growth rates were recorded by the secondary sector of the economy (construction, manufacturing), as well as in the sectors of tourism, banking, trade, transport and other services.
At constant 2005 prices, GDP fell in the second quarter of 2013 to 3,57 bln euros from 3,79 bln in the corresponding quarter of 2012. At current market prices, GDP grew in the second quarter of 2013 to 4,23 bln from 4,56 bln in the second quarter of 2012.
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