In 2023, Cyprus’s central government debt decreased by €689 million, marking a 3% reduction from the previous year, with the total debt standing at €22.4 billion. This fiscal improvement was driven by the repayment of domestic bonds and a strategic approach towards sustainable financing, including the issuance of green and social bonds. The Republic of Cyprus showcased a remarkable fiscal turnaround in 2023, with the central government debt decreasing significantly, setting the stage for economic recovery post-pandemic and boosting confidence among investors and international financial entities.
What is the status of Cyprus’s central government debt reduction in 2023?
In 2023, Cyprus’s central government debt reduced significantly by €689 million, marking a 3% decrease from the previous year, with the total debt standing at €22.4 billion. This fiscal improvement was driven by the repayment of domestic bonds and a strategic approach towards sustainable finance, including the issuance of green and social bonds.
The Republic of Cyprus has shown a remarkable fiscal turnaround in 2023, with the central government debt decreasing substantially. As of the year’s end, the total central government debt stood at €22.4 billion. This figure represents almost the entirety of the national debt of the island nation.
A Closer Look at the Debt Reduction
This significant decline in debt, which amounts to a €689 million cut, indicates a 3% reduction from the previous year. The driving force behind this downturn in debt levels is the repayment of domestic bonds and securities. Despite these repayments, it’s interesting to note that the European Medium-Term Notes (EMTN) have remained a constant, reflecting no change and continuing to serve as a primary financing source.
External vs. Internal Borrowing
The landscape of Cyprus’s borrowing is predominantly external. A whopping 97% of its central government’s debt is sourced from outside the country. This includes EMTN bonds and loans from official foreign bodies. In stark contrast to 2020, when debt levels surged due to reserve building for the Covid-19 pandemic, the debt has now declined by €2.2 billion.
The Public Debt Management Office (PDMO) of Cyprus has also shed light on the state of EMTNs, which remain steady at €13.45 billion, making up 60% of the government’s total debt. In a proactive approach towards sustainable finance, Cyprus introduced its inaugural green and social bond, accumulating €1 billion, which balanced out the maturity of a similar-valued bond.
Domestic Securities and Future Financing
The composition of Cyprus’s debt also includes external loans such as those from the European Stability Mechanism (ESM), totaling €8.52 billion at the year’s end. The repayment of these loans is scheduled to commence in 2025, with full settlement by 2031. On the domestic front, the debt towards the Housing Finance Organisation remains static at €250 million and is due for maturity in 2026.
There has been a noteworthy drop in public bonds, now at just €20 million, down from €137 million in the previous year. Similarly, domestic bonds experienced a sharp decrease to €92 million by the end of 2023, from €617 million at the end of 2022. The total debt in domestic securities has more than halved compared to the end of the previous year, now standing at €420 million.
Looking towards 2024, Cyprus has estimated its financing needs at €1.3 billion. The plan is to raise €1 billion of this through the issuance of EMTN bonds in the international markets, demonstrating a continuous reliance on external financing mechanisms.
Strategic Financial Management
The reduction in debt indicates prudent financial management and a strategic approach to balancing internal and external borrowing. The stability of the EMTN bond debt and the introduction of green bonds highlight Cyprus’s commitment to maintaining a sustainable and responsible financial policy. The continued efforts to repay and reduce debt will likely bolster confidence among investors and international financial entities.
This development is testimony to Cyprus’s resilience and proactive measures in managing its finances post-pandemic. It also sets the stage for the country’s economic recovery and growth prospects in the forthcoming years. The government’s ability to manage its debt effectively is a positive sign for its citizens and the broader European financial community.
How much did Cyprus’s central government debt reduce by in 2023?
Cyprus’s central government debt reduced by €689 million in 2023, marking a 3% decrease from the previous year, with the total debt standing at €22.4 billion.
What factors contributed to the reduction of Cyprus’s central government debt in 2023?
The reduction in central government debt in Cyprus in 2023 was primarily driven by the repayment of domestic bonds and a strategic approach towards sustainable financing, including the issuance of green and social bonds.
What percentage of Cyprus’s central government debt is sourced externally?
A significant portion of Cyprus’s central government debt, approximately 97%, is sourced from external sources, including European Medium-Term Notes (EMTN) bonds and loans from official foreign bodies.
How does the reduction in central government debt in Cyprus impact the country’s economic outlook?
The reduction in central government debt in Cyprus signifies a remarkable fiscal turnaround and sets the stage for economic recovery post-pandemic. This reduction boosts confidence among investors and international financial entities, showcasing Cyprus’s commitment to responsible financial management.
