Government Aims to Maintain High Growth Rate in 2009
Nicosia, Dec 19 – The Cyprus government, amid the global financial crisis, aims to maintain the highest possible growth rate and to minimize pressures on employment in 2009, Minister of Finance Charilaos Stavrakis said in Nicosia Friday.
Mr. Stavrakis was speaking to the press after the approval by the House of Representatives of the 2009 state budget Thursday night. The budget was approved by 33 votes in favor and 20 votes against. It provides for 8.26 billion euros in expenditure, and revenues worth 6.87 billion euros. The budget deficit is 1,390 million euros.
Commenting on the world crisis, the Minister stated that “it is clear that we live through an unprecedented financial crisis, which inevitably will affect Cyprus’s open economy. We are still cautiously optimistic that the impact of this crisis on the economy will be far less than the fallout on the economies of other countries.”
The Minister of Finance stressed that the aim is “to maintain the highest possible growth rate and minimize pressures on unemployment issues.”
Furthermore, Mr. Stavrakis pointed out that “our concern now is the implementation and the realization of the budget and if we see that the situation is getting worst due to the international financial crisis, then for sure there are alternative plans of action which, if needed, will be promoted.”
Mr. Stavrakis underlined that should the global financial crisis deteriorate further, public revenues related to land transactions will decrease, something which will reduce possible surplus for the next year. Therefore, he did not exclude the possibility Cyprus to record “certain small deficits.”
However, he pointed out that the fiscal base is strong and that an impressive reduction of the public debt has been achieved. “Therefore we feel that from the fiscal point of view we have the necessary reserves which, if the need arises, can be utilized to support further the economy,” he added.
Charilaos Stavrakis welcomed the approval of the 2009 state budget and pointed out that the task lying ahead is to increase the budget realization and especially the government development program.
Explaining the budget, Mr. Stavrakis said that it comprises three basic elements: development, it has a social character and fiscally it is well balanced.
The aim set by the government, Mr. Stavrakis said, is to increase the degree of its implementation up to 80%, 90% and if possible up to 100% from the levels of 65%-70% that we are achieving so far. This will contribute to the effort to minimize the impact of the international financial crisis, he said.
Elaborating on the expenditure for development projects provided by the budget, Mr. Stavrakis said that it amounts to 1.1 billion euro, therefore if the implementation degree increased by 10% that would mean a further injection to the economy of the sum of 110 million euro per year.
Referring to the loan worth of 1.4 billion euro from Cypriot commercial banks that the government has concluded, Stavrakis said that this move will allow the government to refinance public loans which expire in 2009, with a primary goal to reduce the cost of public finance. He furthermore explained that the government has achieved to reduce lending interest rate to 3.5%.
At the same time, he said, the loan is effective as from 2009 therefore the 2008 estimated 49.3% public debt index would not be affected.
The loan was concluded during an auction held by the Central Bank of Cyprus on December 15th for the sale by CBC and on behalf of the government of up to 1.4 billion Euro Treasury Bills with date of issue January 2, 2009 and date of maturity October 2, 2009. The total value of the bids submitted was 3,740,000.000. The total value of bids accepted was 1.4 billion euro. The T- Bills will be traded on the Cyprus Stock Exchange.
Mr. Stavrakis said that the government after refinancing public loans expiring in 2009 will deposit a total of 700 million euro to the Cypriot banks until the coming October thus injecting to the local banking system a needed liquidity amid the worldwide financial crisis.
Finance Minister also pointed out that this move is a step leading to the reduction of the lending rates.