State' development expenditure implementation at 72% in 2023

In 2023, 72% of the state budget allocated for development expenditure was implemented, which was up compared with 70% in 2022 and an average of 69% over the past decade.

According to a report by the State Treasury, real development expenditure in 2023 reached €1.03b compared to €782.11m in 2022 και €639.54m in 2021.

The hike over 2022 is mainly attributed to increased spending on the road network which reached 85% (2022: 75%). It was also due to spending on construction works which reached 75% (2022: 59%) and this mainly concerns a grant to the Natural Gas Public Company (DEFA) to be used as capital for the construction of necessary infrastructure for the transportation of natural gas to Cyprus of the order of €30.5m. It was further attributed to an increase in the implementation of expenditure for projects that are co-funded by European resources, which reached 66% (2022: 56%).

The implementation of capital expenditure for 2023 reached €474m, including €227m in co-funded and other funded expenditure, €212m in grants, contributions and subsidies, €81m in social security benefits and €43m in other development expenditure.

The state budget for 2023, which is prepared on a cash basis, showed an increase in income by 14% (2023: €9.77b, 2022: €8.56b.) and an increase in expenditure in the range of 8% (2023: €12b, 2022: €11.14b.).

The budgeted increase in income is mainly due to an increase in direct and indirect taxes by €0.96b and €0.53b respectively, while the budgeted increase in expenditure is mainly due to an increase of €0.24b in payroll, pensions, and gratuities.

In relation to the implementation of the state budget, at the end of 2023 total income came to €9.94b, which corresponds to 102% of the budget (2022: €9.26b, 108%) and real expenditure reached €10.92b, which corresponds to an implementation rate of 91% (2022: €10.16b, 91%).

The implementation of the state budget in relation to total expenditure is at the same level as the previous year but has dropped in relation to income.

According to the Treasury's report, indirect taxes were up by €0.5b (43%) compared to 2022, mainly due to an increase in income from VAT by €0.42b (2023: €2.96b, 2022: €2.54b).

Direct taxes increased by €0.24b (8%) compared to 2022, mainly due to the income tax of legal and natural persons (2023: €2.89b, 2022: €2.61b).

Loans in 2023 totalled €1.14b. (2022: €1.15b.), of which €0.99b concerned an issuance of European Medium Term Notes (EMTN) of a nominal value of €1b, €0.13b from loans from the European Investment Bank (EIB) and €0.03b from the issuance of bonds for natural persons.

End of year implementation to do with payroll, pensions and gratuities shows an increase of 10% (€0.29b), from €2.91b in 2022 to €3.20b in 2023.

Repayment of debt and interest at the end of 2023 came to €2.53b (2022: €2.44b), of which €1.1b (2022: €1.1b) have to do with the repayment of external debt, €0.8b concern interest and charges (2022: €0.5b) and €0.63b (2022: €0.84b) concern repayment of home debt.

Social security benefits in 2023 reached €1.8b (2022: €1.73b). The increase of €0.07b (4%) is due to increased expenditure for welfare benefits by €0.04b (2023: €0.70b, 2022: €0.66b) and to increased expenditure for health services by €0.03b (2023: €0.76b, 2022: €0.73b).

According to the Treasure, the budget implementation at the end of year shows an increase of 7% (€0.11b) compared to €1.47b in 2022 to €1.58b in 2023, which is mainly due to an increase in the government contribution to the Social Insurance Fund by €0.7b (13%) and the subsidy of the electricity cost to deal with inflationary pressures by €0.03b (2023: €0.07b, 2022: €0.04b).

Operation and other expenditure reached €1.09b (2022: €1.11b).