Ukraine war may derail public debt

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The government aims to reduce public debt to 94% of GDP in 2022, but this target could be affected by the economic crisis, and the war in Ukraine, said Finance Minister Constantinos Petrides.

He said public debt in 2019 had dropped to 91% of GDP but added that in 2020 because the government took out emergency loans from the markets to support society during the pandemic with nearly €3 trillion, the debt reached 115.4% of GDP.

“Now it is down to 103.9% of GDP, which rating agencies have much appreciated,” he added.

“Our aim is for it to drop to 94% by the end of 2022…of course, I do not know how much this will be reversed due to the economic crisis and as a result of the war.

“It is, however, at satisfactory levels in relation to what it could be due to the crisis if we compare it with other EU countries.

“According to our programme, the debt will be at 75% by the end of 2025.”

Petrides said that conditions of uncertainty that are prevalent internationally do not allow for safe predictions.

He spoke after a meeting of the parliamentary committee on public expenditure, which discussed the General Auditor’s report on the Public Debt Management Office.

Petrides said he was satisfied with the report’s findings, which “praises the way of operation and management of public debt by the Public Debt Management Office of the Finance Ministry.”

He added that several recommendations are included in the report, which he would study.

Asked about inflation, he replied that it would depend on the intensity and longevity of the war.

“Right now, there is great uncertainty, but personally, I do not expect that it is a matter (inflation) which will end soon”.

He said the government had taken targeted steps to shield vulnerable groups.