Finance Minister Keravnos Prioritizes Large Fiscal Surpluses Despite Economic Concerns
Finance Minister Makis Keravnos has presented the 2027 government budget featuring a large fiscal surplus of 4% of GDP, or €1.6 billion, marking the third consecutive year of surplus budgets. This decision has sparked criticism as many argue the surplus is unnecessary given Cyprus’s low public debt ratio and strong financial reserves. Critics warn that such surpluses reduce domestic demand, potentially slowing economic growth and impacting household well-being in a challenging cost-of-living environment.
The 2027 budget has also been criticized for its allocation priorities. While defence and police expenditures rise substantially, spending on personnel wages and pensions sees only minimal increases, raising concerns about fairness and timing—particularly with a notable salary increase scheduled for 2028 ahead of presidential elections. Public investments in infrastructure, energy, and innovation are also forecasted to grow marginally or even decline, despite ongoing needs for reliable energy and economic competitiveness.
On the revenue side, the budget shows a heavier reliance on regressive VAT taxes, burdening lower-income households, while tax contributions from higher earners and self-employed individuals appear insufficient and declining. Lawmakers are being urged to reject the proposed budget unless it is amended to increase social spending and infrastructure investment, ensuring fiscal policies better support economic growth and social equity.
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