COVID19: Cyprus public debt jumps to 113% of GDP

Cyprus general government debt spiked to 113% of GDP (€24.56 bln) in April, reflecting the borrowing spree the Finance Ministry mounted to mitigate the impact of the coronavirus outbreak.

Cyprus’ debt bloated to 113% of GDP in April from 95.5% at the end of 2019, official data shows.

The Finance Ministry began 2020 with an EMTN issuance of €1.75 bln to repay the remainder of an IMF loan secured during the 2013 financial crisis and to boost its cash reserves.

Initial ministry estimates said strong growth rates coupled with strict public financial management, the debt would decline to 91% at end-2020.

However, the declining trajectory came to an abrupt halt due to the Covid-19 health emergency triggering a two-month lockdown.

This prompted the government to launch two fiscal packages to support the economy and preserve jobs.

Nicosia issued bonds amounting to €3 bln in early April, a double EMTN trade of €1.725 mln and a €1.25 bln domestic bond to further boost its cash reserves, as state income took a significant hit due to lockdown measures.

The Finance Ministry aims to cover both its fiscal and financing needs for 2020, despite an expected deficit of over €1 bln this year.

Cash reserves aim to cover Cyprus’ financing needs for the next nine months on a rolling basis, according to the Public Debt Management Office strategy.

According to Finance Ministry projections, as stipulated in the Stability Programme submitted to the European Commission, GDP will decline by 7% in 2020 due to the Covid-19 fallout.

Public debt is expected to be 117% of GDP by end-2020.

However, the upward trend is expected to be contained as the economy will rebound next year with 6% growth which should push public debt down to 103% in 2021.