Minister for Finance, Makis Keravnos, spoke on Wednesday of a balanced and growth-oriented budget for the year 2027, following the approval of the relevant bill by the Council of Ministers, which will be put to a vote in the House of Representatives in December.
In his remarks following the conclusion of the Council’s session, Keravnos stated that the 2027 budget amounts to pound 11.1 billion, representing an increase of approximately 470 million compared with last year’s 2026 budget.
He also said that the growth rate in 2027 is expected to be around 2.9%, despite the fact that there are encouraging signs that it may even exceed 3%, whilst unemployment is expected to remain at current levels of full employment, with a downward trend.
He added that the budget balance for 2027 is forecast to be in surplus and is expected to rise to 2.8% as a percentage of gross domestic product, compared with 2.3% in 2026, whilst, the primary balance is expected to rise to 4% of GDP, compared with 3.6% in 2026.
On the subject of inflation, he said that it is directly affected by fuel prices, with the forecast predicting a rate of around 4%.
Furthermore, the Minister of Finance noted that in the 2027 budget, as well as in the 2027-2029 medium-term fiscal framework, particular emphasis is placed on increasing defence spending.
‘The aim of the 2027 state budget, as well as the medium-term fiscal framework, is to maintain a budget surplus, to continue to keep public sector employment in check, further reducing public debt in the medium term, and promoting the green transition and digital transformation, as well as fostering sustainable growth in key sectors of the economy and maintaining a robust financial system’, he noted in this regard.
He added that in 2027, development expenditure is expected to reach pound 1.1 billion, whilst capital expenditure is expected to increase by 2.1% in 2027 compared with 2026.
He also said that the Government is consistently continuing its efforts to contain the public sector wage bill as a result of specific measures and policies implemented by the Ministry of Finance.
‘True to these commitments, we have succeeded for the third consecutive year in keeping public sector employment stable, as well as in the 2027 budget, which provides for a reduction of 51 posts compared with the 2026 budget. More specifically, expenditure on civil servants’ costs, the public sector wage bill, stood at 28.2% in the 2025 budget, 27.2% in 2026 and 26.1% in the 2027 budget which has just been approved by the Council of Ministers,’ he further explained.
Keravnos added that the medium-term outlook for the Cypriot economy remains positive, as recognised by both international agencies and the European Commission, however, there is a significant degree of uncertainty due to adverse geopolitical developments.
Regarding the growth rate in 2027, he said it is expected to be around 2.9%, despite the fact that there are encouraging signs it may even exceed 3%, while the level of public debt as a percentage of gross domestic product is expected to drop to 46.6% during 2027, compared with 49.9% today.
‘The 2027 national budget, as well as the 2027-2029 medium-term fiscal framework, constitute concrete evidence of the government’s policy, for yet another year, of stable growth, fiscal responsibility and social progress,” he noted.
According to Keravnos, “the ultimate and fundamental objective of both the budget – as the key instrument for economic policy implementation – and of development-oriented economic policy is to pass on the benefits to society, to our workers and to our businesses, ensuring the continued resilience of our economy and of the younger generation,’ he stressed.
The Minister of Finance also announced the Cabinet’s decision to approve the budget that has been approved by the National Solidarity Fund.
As he explained, the draft budget for the Fund for 2026 covers expenditure of pound 28,725,209, which will be paid to individuals who have been approved.
‘The platform will open in the coming period, towards the end of September; the details of those who have been approved will be registered, and those who have not yet submitted them will be able to benefit from the amounts allocated in the Fund’s budget that I have mentioned, as well as those who have already received payments under the scheme approved in 2025 and continuing until 2026,’ he added.
Asked whether the potential impact of the pension reform currently under discussion had been factored into the budget, Keravnos replied that it had been taken into account and weighed up.
“An orderly organisation – and every government is an organisation that must function well – must plan properly. We are implementing the amending budget and where savings arise, we ensure they are allocated immediately through the amending budget,” he said.
The pension reform has not been completed, he recalled. Currently, he said, the state pays around 360 million to cover pensions, adding that “the state will continue to pay these, and they are budgeted for.” He also noted that “it has been factored into the budget that there may well be other costs, including those arising from pension reform.’
Asked to comment on a statement made by President Nikos Christodoulides in a television interview regarding the subsea electricity cable connecting the power grids of Greece and Cyprus known as GSI, that the issuance of a NAVTEX would release the pound 25 million for the electricity interconnection project, and whether, in such a case, the Ministry of Finance would give the ‘green light’, Keravnos said that he could not comment on the views of the President of the Republic. “When the President of the Republic has made a statement, it is a given that this is the government’s position,’ he explained.
Asked about today’s meeting regarding the demands of hourly-paid staff, he said it had been a meeting held in a constructive spirit.
‘That is why, after all, we concluded that any action or strike should be postponed”, he added.
According to the Minister of Finance, “a number of demands have been put forward by the hourly-paid workers.” He added that “the government has shown considerable attention and interest in the category of hourly-paid workers; that is why, over the last three years, there have been significant concessions and benefits, and the majority of the requests submitted have been dealt with positively.”
“There remains an outstanding issue regarding pay rises, which they will discuss with me at some point next week, as I am leaving for Ireland tomorrow to attend the Eurogroup and ECOFIN meetings, and afterwards we will hold a meeting with the President of the Republic and representatives of hourly-paid workers to reach a final conclusion,’ Keravnos said.
Asked about inflation levels in 2027, the Minister explained that inflation is directly affected by energy prices and that fuel prices fluctuate daily, having reached certain high levels.
‘The estimate is that it will be around 4%. Beyond that, however, it is merely an estimate and we must monitor developments closely,’ he noted.
Asked whether the tax reform had offset the cost of social benefits, Keravnos said that, as a result of the tax reform, general government revenue has increased by almost 3% since 2026, reaching pound 17 billion, whilst expenditure has risen by only 1.4%, meaning that the resulting surplus is 2.8%.
‘Therefore, there is an increase in revenue and an increase in expenditure that is growing at a slower rate than that of revenue. This is an initial safeguard, but this slower rate of growth can also be explained by the factors mentioned above,’ he concluded.