IMF: Cyprus debt to drop below 60% limit by 2027

Cyprus will present a high and significant primary and fiscal surplus driving its public debt-to-GDP ratio below the 60% limit of the EU’s Maastricht criteria by 2027, the International Monetary Fund (IMF) said in its October 2023 Fiscal Monitor.

With regard to fiscal balance, the IMF estimates that Cyprus will register surpluses throughout the projection horizon with an average surplus of 1.4% of GDP from 2023 to 2028.

This year, IMF estimates that Cyprus will record a fiscal surplus of 1.9% of GDP, followed by 1.7% in 2024 and 1.5% in 2024. For 2026 to 2028, Cyprus is projected to register surpluses amounting to 1.3%, 1% and 09% respectively.

IMF also projects high primary surpluses for Cyprus in the projection horizon. Primary balance, which is the balance excluding debt servicing costs, is an index for debt sustainability.

This year, Cyprus’ primary surplus will reach 3.2% of GDP, followed by 3% in 2024, and 2.7% in 2025. For the period of 2026 to 2028 Cyprus is estimated to register primary surpluses of 2.5%, 2.2% and 2.2% respectively.

Public revenue to GDP will amount to 40.5% this year and will ease to 40.3% in 2024 and 40% in 2025. In 2026 to 2028 public revenue will range from 39.2% to 39.1%.

State expenditure will amount to 38.6% this year and ease to 38.7% in 2024 and to 38.5% in 2025. For the period of 2026 to 2028 Cyprus state revenue will stabilise at 38.2%.

Public debt to decline below 60% by 2027

Concerning public debt, the IMF’s Fiscal Monitor estimates that debt-to-GDP ratio will reach 78.6% this year and will decline to 70.9% in 2024 and to 66.8% in 2025. In 2026 Cyprus’ debt will further drop to 61.7% in 2026 and will decline to 58.4% in 2027, below the 60% benchmark and to 55.1% in 2028. This year’s Fiscal Monitor projections on Cyprus’ public debt are more optimistic than last year’s which estimated that the debt ratio would drop to 66.2% by 2027. The new upbeat projections may be associated with the increased nominal GDP due to high inflation.

Furthermore, the IMF maintained Cyprus gross financing needs for 2023 to 8.1% of GDP.