The President of the Fiscal Council, Michalis Persianis, raised concerns on Monday about the increasing size of Cyprus's public sector and the deficits in provident funds during discussions on the 2025 state budget in the House Finance Committee.

Persianis highlighted that the size of the state has grown significantly, from 29% of the economy 15 years ago to 45% today. This expansion, he noted, has not translated into proportional improvements in service quality or efficiency for citizens. “The relationship between what citizens pay and what they receive continues to worsen,” he said.

Following the session, Persianis described Cyprus’s current fiscal state as strong and inspiring confidence. He emphasized that this stability presents an ideal opportunity to address longstanding structural issues and imbalances.

On the state apparatus, Persianis underscored the importance of improving productivity through internal digital transformation. While digital interfaces for citizen-state interactions have advanced, internal management processes lag behind. Enhancing these operations, he noted, could align costs with tangible benefits for taxpayers.

“Digitalizing internal state functions can help sustain the progress Cyprus has made over the past two to three years,” he remarked.

Persianis also warned of actuarial deficits in provident funds within the wider public sector. He described these deficits as a significant fiscal issue that demands attention before they create a financial burden on the state budget.

Particularly concerning is the potential shift of provident funds into pension schemes, which would transfer the full financial burden onto the state. While solutions remain feasible, Persianis cautioned that delays could exacerbate both the scale of deficits and the severity of required measures.

“Addressing these challenges in the coming months is critical. Delayed action will not only inflate deficits but also make solutions more painful, whether for beneficiaries or for public finances,” he concluded.