Thursday, June 20 2024

Cyprus FinMin warns of troubles ahead

Cyprus FinMin warns of troubles ahead

The Cypriot government will continue supporting households, especially the vulnerable, amid rising inflation, the island’s Finance Minister Constantinos Petrides said, warning that tackling inflation is difficult due to its structural nature amid the Ukrainian crisis.

In an interview with the Cyprus News Agency, Petrides said the government’s intention is to extend the reductions of excise duty on fuel and value-added tax on electricity bills for what will possibly be another three months, depending on how the situation evolves and the capacity of public finances.

Petrides is pessimistic about tackling rising inflationary pressures, which, he said, are not only fueled by the Russian invasion of Ukraine but also by the European Union’s push toward the green transition, as well as the sanctions imposed by the EU against Moscow. In that respect, the ministry will reconsider reprioritizing public investments in infrastructure projects so that the state budget ceilings will not be breached due to the sizable price increases in raw materials.

He cautioned “things will be difficult in the coming years” and highlighted the importance of maintaining fiscal buffers.

“The economy is not a game. The economy warrants sincerity and prudent management, and governments that engage in populism are dangerous, as we have seen in the past in Cyprus,” he said before going on to note that he hopes “the next government will follow a prudent way in management both for us and our children, with no populism and policies which may seem satisfying in the short term but may prove destructive in the future.”

Furthermore, as Cyprus has so far failed to acquire any disbursements from the National Recovery and Resilience Plan, Petrides said that losing these grants, which the economy and future generations need, “would be a crime.”

Responding to a question on rising inflationary pressures in the current economic environment, Petrides acknowledged that tackling them is difficult due to their structural nature as energy prices will continue to rise fueled by geopolitical tensions but also by the EU’s push toward growing green energy.

“What we are trying to do is to alleviate the consequences as much as possible, especially for the vulnerable,” he said, recalling that so far the government has taken measures amounting to 150-160 million euros.