Cyprus Development Expenses Hit 29% of Budget by End of July

The implementation rate of development expenses from Cyprus’ state budget reached 29 per cent by the end of July, according to a report released by the Treasury.

This figure is slightly above the ten-year average of 26 per cent for the same period, representing €446.1 million out of an annual development expenditure budget of €1.49 billion.

In terms of the broader fiscal landscape, the report revealed that total state revenues by the end of July amounted to €5.90 billion, representing 52 per cent of the annual budget. This marks a slight decrease from the previous year’s figure of 57 per cent for the same period, when revenues stood at €5.56 billion. Meanwhile, actual expenditure reached €6.43 billion, corresponding to 48 per cent of the budget. This also reflects a decrease compared to 2023, when expenditure had reached 50 per cent, totalling €6.04 billion.

The decline in revenue implementation compared to 2023 has been largely attributed to a drop in indirect tax collection. The implementation rate for indirect taxes fell from 61 per cent in 2023 to 54 per cent in 2024. Additionally, the slight reduction in expenditure implementation is primarily due to the timing of public debt repayments. As of July 2024, €1.9 billion had been repaid, amounting to 57 per cent of total debt repayment obligations.

This compares to €1.7 billion, or 68 per cent, during the same period last year.

The state budget, prepared on a cash basis, highlights an overall increase in both revenues and expenditures. Revenues are expected to rise by 16 per cent, from €9.77 billion in 2023 to €11.28 billion in 2024. Expenditures are also forecasted to increase by 13 per cent, from €12 billion in 2023 to €13.5 billion in 2024. The projected rise in revenues is largely attributed to anticipated growth in both direct and indirect taxes, which are expected to generate an additional €0.61 billion and €0.68 billion, respectively.

On the expenditure side, increased outlays on loan and interest repayments, as well as salaries, pensions, and gratuities, are expected to drive the increase. Specifically, loan and interest payments are forecasted to rise by €0.77 billion, while expenditures on salaries, pensions, and gratuities are projected to grow by €0.36 billion.

Looking more closely at revenues as of the end of July, indirect tax revenues experienced a 5 per cent year-on-year increase, with a rise of €0.11 billion. This was largely driven by an increase in VAT receipts, which grew by €0.12 billion to reach €1.75 billion, up from €1.63 billion in 2023. Direct tax revenues saw an even more pronounced increase of 16 per cent, equating to €0.26 billion, due to higher receipts from both corporate and personal income taxes. Total direct tax revenues for this period amounted to €1.66 billion, compared to €1.39 billion in 2023.

Borrowings remained steady compared to the same period last year, holding at €1.09 billion.

Expenditures related to salaries, pensions, and gratuities rose by 5 per cent, increasing from €1.70 billion in 2023 to €1.78 billion in 2024. Loan repayments up to the end of July reached €1.89 billion, compared to €1.73 billion in 2023. Of this amount, €1.05 billion was allocated to foreign loan repayments, €0.51 billion to interest payments, and €0.33 billion to domestic loan repayments.

Spending on social benefits reached €1.03 billion by July, up from €0.96 billion during the same period in the previous year, marking a 7 per cent increase. This rise was mainly due to higher expenditures on social welfare and healthcare benefits. Welfare benefits increased by €0.04 billion, reaching €0.44 billion, while healthcare benefits rose by €0.03 billion, amounting to €0.42 billion.

Transfers and grants also experienced a notable increase, totalling €0.94 billion by the end of July, a 9 per cent rise from the €0.86 billion recorded during the same period in 2023. This increase was primarily driven by a higher contribution to the Social Security Fund, which grew by €0.05 billion, as well as increased sponsorship to educational institutions such as the University of Cyprus and the Cyprus University of Technology.

Operating and other expenses saw a modest increase of 2 per cent, rising to €0.51 billion.

Regarding development expenditure, the implementation rate up to July 2024 reached €162.3 million. The majority of this spending was directed towards infrastructure projects, including €55.9 million for the road network, €17.8 million for school infrastructure, and €16.9 million for the purchase of land and buildings. Additionally, €12.7 million was allocated for sewerage and water systems, €10.3 million for fixed and mobile equipment, and €6.1 million for the construction and improvement of government offices.

Co-financed projects accounted for €101.1 million of the development expenditure, with €25.9 million allocated to projects implemented by non-governmental organisations and €20.7 million for projects co-financed by Internal Affairs Funds. Other notable projects included the Tuition and Meals Subsidy Scheme for children up to four years old (€11.6 million), the Competitiveness for SMEs project (€9.2 million), and energy efficiency programmes aimed at upgrading homes (€5.6 million).

In terms of grants, contributions, and subsidies, €134.3 million had been implemented by the end of July, with the majority directed towards the University of Cyprus (€74.4 million) and the Cyprus University of Technology (€42.3 million). The Open University of Cyprus received €6.5 million, the Institute of Neurology and Genetics €3.8 million, and the Cyprus Institute €2.8 million.

Finally, social benefit implementation stood at €32.4 million, with key programmes including the state scholarship programme (€12.8 million), grants to voluntary organisations (€9.8 million), and educational benefits (€5.1 million). 

By fLEXI tEAM