Businesses encouraged to adopt dual pricing now

The Central Bank of Cyprus and Ministry of Finance are encouraging businesses to start pricing and invoicing in both Cyprus pounds and euros immediately, using an exchange rate that will be announced every Friday.

The scheme will be voluntary but will become compulsory closer to the adoption of the euro.

Cyprus, which joined the Exchange Rate Mechanism in May 2005, is due to adopt the euro in January 2008, although share prices will start to be quoted in euros as soon as April, assuming that the common trading platform with Athens is implemented on time.

Under normal circumstances, businesses would only adopt dual pricing once the final “irrevocable exchange rate” between the Cyprus pound and euro is fixed, which will not be known until late 2007.

The central parity rate with the euro is currently 0.585274 Cyprus pounds per euro, although the pound has been trading about 2% stronger than this rate, trading at 0.5753 on Thursday March 16.

The authorities have decided to move to a form of dual pricing early in order to address public opinion, which is sceptical about the euro.

A report commissioned by the Central Bank showed that Cypriots were very uncomfortable about the impact of the euro on prices, expecting retailers to take advantage and hike prices.

The main coalition party, the communist AKEL, called earlier this year for a delay in the adoption of the euro to 2009.

The Financial Mirror has been displaying its cover price in Cyprus pounds and euros for well over a year.