-
.
- Ελληνικά
Following the statements of the President of the Fiscal Council (BoG) on 31 August 2023 regarding the Social Insurance Fund (SIF) and public finances, in the context of comprehensive public information, the Ministry of Finance comments as follows:
[*]The Ministry of Finance systematically and on a permanent basis monitors developments in the economy and primarily developments concerning public finances, for the need to take any measures, if deemed necessary, in line with our commitments under the European Union (EU) acquis. In addition, it is noted that based on Article 41 of the Law on Fiscal Responsibility and the Fiscal Framework in relation to the fiscal position, it is envisaged that the structural fiscal balance of the General Government shall be balanced or in surplus in the medium term. [*]Based on data from the Statistical Service of the Republic (independent agency), the fiscal balance of the General Government in the first half of 2023 showed a surplus of €155.4 million (0.5% of GDP) compared to a deficit of €92.4 million in the corresponding half of the previous year (-0.3% of GDP), an improvement of 0.8 percentage points of GDP. [*]At the same time, the forecast for the general government fiscal balance for the first half of 2023, in the context of the projections of the 2023-26 Stability Programme, submitted to the European Commission on 2 May 2023, was a deficit of €67 million (-0.2% of GDP). Based on the above, the fiscal position for the first half of 2023 was €222.4 million better than initially expected. Therefore, based on the 2023 Half-Yearly Fiscal Policy Report, it is concluded that there is no need for any additional corrective measures, which is done whenever necessary. [*]With regard to the reference to the statements of the Chairman of the Board regarding fiscal deficits and their financing by the CDF, it should be noted that over time the Central Government has not financed any of its deficits from the reserve, since this reserve is notional and reflects its liabilities to the CDF, which will cover in the long run the deficits of the Fund that will arise due to an ageing population. Moreover, for the reserve in question, on the basis of an arrangement decided on 01/08/2010, an interest rate of 4.25% is currently paid to the TKA and an interest rate of 4.00% to the other funds managed by the Director of the Social Security Agency. The total interest payable which was paid in June 2023 amounted to approximately €158 million of which approximately €138 million related to the TKA. [*]As regards the references by the Chairman of the Board of Directors to the inclusion of the TKA reserve in the estimates in relation to its sustainability, it is stressed that it is already taken into account, and according to the most recent actuarial study on the subject, the TKA is considered sustainable until 2080. [*]Furthermore, the budgetary results of July 2023 show a General Government surplus of €214.4 million compared to a surplus of €201.9 million in July 2022, hence the analysis of the Chairman of the Board is considered unfounded. [*]It is important to stress that any analysis of the budgetary results should not exclude any month within the year, since month by month the results are characterised by seasonality, and therefore the conclusions of such an analysis will be misleading with figures that do not correspond to reality. [*]Regarding the statements on the possible postponement of certain expenditures from 2023 to 2024, it is noted that the calculation for the accrual basis of the general government budget balance is not affected since the expenditures are recorded on the basis of the commitment to implement them, regardless of when they will be disbursed. [*]At the same time, the Chairman's comments do not include any reference to the primary balance (fiscal balance excluding public debt service expenditures), which reflects the government's ability to reduce or increase public debt. According to the results for the first half of 2023, the general government's primary deficit reached €385.3 million, compared to a primary surplus of €112 million in the corresponding half of 2022. [*]With regard to the statements about not achieving the reduction of public debt to 81.1% of GDP at the end of 2023, it is noted that the target has already been achieved, since at the end of July the public debt was reduced to 80.1% of GDP. [*]The recommendation of the Chairman of the BoD to repay the debt to the Social Security Fund clashes with his comments about reducing public spending, a recommendation that would cause the erosion of the fiscal balance, and an increase in public debt, while today the above does not exist.
The Ministry of Finance, on the basis of special studies, proposes to start the gradual repayment/investment of the Social Security Reserve, after the reduction of the Public Debt as a % of GDP below 60% (estimated within 2027) and with the establishment of the Cyprus Investment Management Agency, which will provide investment management services, and the Social Security Fund.
____________
BIO[/B]
Contents of this article including associated images are owned by PIO
Views & opinions expressed are those of the author and/or PIO
Source
