The public finances, financial sector, and energy matters will be examined by the European Commission, the European Central Bank, the European Stability Mechanism, and the International Monetary Fund over the next 24 hours, until Monday, October 7, 2024.

The examination began on September 30, 2024, with a primary focus on public finances and the impacts of developments in the Middle East.

According to sources, during the meetings held via teleconferences, the Troika technocrats are showing interest in a range of issues, such as:

First, the geopolitical developments, with an emphasis on energy and the possibility of renewed inflationary pressures due to the ongoing conflict between Ukraine and Russia and the war in the Middle East.

Second, the negative developments in other countries' economies, which are affecting productive sectors, including Cyprus’ economy, potentially impacting key indicators such as the fiscal balance, public debt, the current account balance, and unemployment levels.

Third, the macroeconomic outlook and possible repercussions on the economy due to rising oil prices because of the regional crisis.

Fourth, the potential impact of increased migration flows.

Fifth, the reduction in interest rates, the expansion of borrowing margins, and the performance of banks.

Sixth, the real estate market and the effects of developments in the global and local economy.

However, in the previous assessment and debt sustainability analysis, Cyprus was shown to face low risks in the short and long term. It was even estimated that "the government’s financing needs for 2024 were low, as they were supported by a projected significant primary surplus and a substantial cash reserve."

As concluded by the technocrats from the four organizations:

Nevertheless, this picture could change due to the ongoing conflicts in the region and other serious challenges the economy is expected to face shortly and in the coming year, such as:

- Increases in operating expenses due to fuel and energy price volatility, as well as rising construction costs.

- Increased expenses for servicing public debt due to the rise in European Central Bank interest rates and the gradual withdrawal of the ECB's quantitative easing program.

- Potential liabilities arising from unsustainable pension funds and pending legal cases.

- Poor economic performance by state entities, local authorities, and public-private partnerships.

- Possible fines due to non-compliance, either partially or fully, with EU regulations.

A source from the Ministry of Finance explained that "one of the main challenges, as also communicated to the Parliament in the fiscal report accompanying the state budget for 2025, is the €400 million compensation for the Vasilikos terminal, as well as the burden on public finances from the possible need to finance the deficits of the State Health Services Organization (OKYPY) for a longer period than specified by law."