Finance Minister Constantinos Petrides urged MPs to approve the budget as Cyprus is gripped by the pandemic, revealing it was drafted on the assumption that another national lockdown would be unnecessary.
Presenting the 20121 state budget to the parliamentary committee of Finance and Budgetary Affairs, Petrides said: “The budget was drafted on one premise, that we will not go into total lockdown”.
He said in the worst-case scenario, another national lockdown, the Finance Ministry will adjust its budget expenditure as it did during the pandemic outbreak in March.
Cyprus was able to contain the first coronavirus outbreak with a swift and harsh national lockdown that was gradually lifted from early May.
Freedom of movement was restricted, a curfew imposed, and only essential businesses could open.
Petrides said that a similar lockdown would only be deemed necessary if the country’s healthcare system could not cope with rising hospital admissions.
“We do not intend to go into a total lockdown as we did in March and April, that would mean an economic disaster.”
He said most EU countries did not return to full lockdown despite the second wave of coronavirus infections.
Many countries prefer to introduce local lockdowns where the infection rate is high.
Cyprus, like the majority of EU countries, is in the middle of the second wave of Covid-19 infections with the authorities announcing additional measures to contain the spread of the pandemic and a partial lockdown in Limassol and Paphos where transmission is spreading.
“Yes, measures should be taken and measures should be adjusted on daily basis,” said Petrides.
Cyprus is experiencing much higher infection rates than it did the first time around.
Emergency budget
Calling on MPs to approve the budget, Petrides said it was a “critical moment” in the financial management of the pandemic, noting that everyone must help the country recover from COVID-19 fallout.
He described the budget as one of “emergency”.
“It has been drafted on the premise of targeted fiscal expansion which will not lead to a fiscal slippage, creating the conditions for a sustainable economy.”
He said the budget’s primary target is to tackle the consequences of the pandemic and to create the foundations for generating primary surpluses.
The budget provides for an economic recovery in the region of 4.5% GDP in 2021 following a contraction of 5.5% this year due to the coronavirus outbreak, but these projections remain unstable.
Following years of fiscal surpluses, Cyprus’ fiscal balance will record a deficit of 4.5% of GDP in 2020 and a much smaller deficit of 0.7% in 2021.,
Public debt is projected to rise to 115% of GDP at end-2020 and will decline to 110% GDP in 2021.
Petrides said the public debt rose as a result of large bond issuances by the government in a bid to create the necessary cash reserves which amount to 20% of GDP.
Opposition parties argued that the budget relies on “unrealistic” forecasts.
Left-wing AKEL spokesman, Stefanos Stefanou said the government’s assumptions are “very optimistic” fearing it “will not be able to respond to the difficult equation created by the coronavirus pandemic.”
Centre Diko Party, Parliamentary Spokeswoman, and Committee President Christiana Erotokritou said the government’s assumptions are “disconnected from reality”.
She argued the government did not factor in two basis developments, the larger second wave of coronavirus infections and the termination of Cyprus Citizenship by Investment Scheme, following the revelations by the Al Jazeera network over corruption associated with the scheme.
Erotokritou said her party will vote against the budget if the government fails to provide access to the Audit Service to probe citizenship scheme.
Green MP Giorgos Perdikis said his party will vote against the budget as does not do enough on social and environmental protection.
