Cyprus’ public debt is projected to drop below the 60% threshold in 2026, according to the assumptions outlined in the upcoming state budget for that year.

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If achieved, it would be the first time in recent years that Cyprus’ public debt falls beneath 60%, placing the country among the top EU member states with the lowest debt ratios.

Forecasts suggest that debt will decline to around 58% by the end of 2025 and fall by a further five percentage points in 2026. Projections indicate additional reductions to 50% or lower by 2028, and below 45% by that year’s end.

The 2026 state budget is expected to be approved later today during an extraordinary cabinet meeting. On October 2, Finance Minister Makis Keravnos will submit it to the House of Representatives, handing it to Speaker Annita Demetriou.

According to Brief, the budget was drafted within the strict framework of the new EU economic governance rules adopted in April 2024. Finance Ministry technocrats believe the plan falls well within the ceilings approved by the European Commission.

The Fiscal Council has already reviewed the draft budget and given its green light.

One key feature of the upcoming budget is the containment of the public wage bill, which as a share of the budget is projected to remain at 2025 levels or slightly lower.

However, despite tighter controls—such as filling vacancies only with strict justification—the wage bill is expected to rise due to cost-of-living adjustments (ATA) and annual increments, reaching €3.7 billion in 2026 compared with €3.6 billion in 2025.

Revenues for 2026 are projected at €11 billion (excluding loans), while expenditures are expected to increase to €11.4 billion (excluding interest payments). The resulting €600 million gap is expected to be covered through existing borrowing, avoiding the need for a new bond issue.

The Cypriot economy is forecast to grow by more than 3% in 2026. Inflation is projected at 0.3% by the end of 2025, with a slight upward trend in 2026 due to geopolitical risks.

The primary surplus is expected to exceed €800 million, while the overall fiscal balance is projected to remain in surplus.