Fiscal Council: Government must tackle €10b Social Insurance Fund debt

08:19 - 01 September 2023

Economy

The Fiscal Council has urged the government to initiate a plan to gradually tackle its debt to the Social Insurance Fund, which after years of borrowing to the central government has added up to over €10b.

"It is, therefore, a steadily increasing contingent liability on the budget and one of the most important risks to public finances," the Council said, noting the need for immediate planning for its gradual repayment.

The Council also recommended measures for the government to limit inelastic costs, as well as the immediate initiation of planning to improve productivity of the public sector, which it stressed should precede any mass hiring, "regardless of the political cost".

It further noted that accelerating implementation of the terms of the Recovery and Resilience Plan (RRP) may be key in view of the expected slowdown of the economy, and suggested increasing the pressure on Ministries and competent bodies, as well as parliament, for the immediate completion, at least of the conditions for the second instalment.

Overall, the Fiscal Council noted that the Cyprus economy is under significant pressure, which is not surprising what with the monetary policy, which is effectively restraining credit expansion and reducing overall demand. In addition, it added that the outlook is under pressure due to the expected partial recovery in prices of important items and production resources (e.g. fuel) and the small recovery in inflation.

The Fiscal Council will review the estimate of the growth rate next September, without expecting a significant deviation from the existing one, at 2.4%.

Fiscal Council: Government must tackle €10b Social Insurance Fund debt

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