The Cyprus parliament Thursday approved the government's record 2.42 billion Cypriot pound ($3.94 billion) budget spending for 2001 by a majority vote following three days of heated debate.
Finance Minister Takis Klerides welcomed parliament's approval and said he would take on board opposition concerns about the economy's over-reliance on tourism, which fetched a record 1.2 billion Cypriot pounds ($1.956 billion) in 2000 from a total gross domestic product (GDP) of over 5.4 billion Cypriot pounds ($8.8 billion), and assisting lower income families.
The government will now push ahead with its European Union tax harmonization package by proposing that VAT (value added, or sales, tax) goes up from 10 to 13 percent as it moves towards the EU average of 15 percent.
Excise duty on diesel fuel and alcohol is also set to rise considerably. Public sector salaries make up 35 percent of total expenditure, with education at 25 million Cypriot pounds ($40 million) and roads at 55 million pounds ($90 million) topping the spending list.
The 2001 budget shortfall is set at 844.6 million Cypriot pounds ($1.37 billion). Economic growth is forecast at 4.5 percent of real GDP for this year fuelled by a booming services sector. Inflation is expected to reach an average of around 3 percent ¯ from last year's peak of 4.5 percent ¯ in line with the Maastricht convergence ceiling of 3 percent.
The government expects to lower the fiscal deficit to 3.3 percent of GDP (194 million Cypriot pounds or $316 million) ¯ helped by lower fuel costs ¯ in 2001 and reduce it to two percent over the next two years, from a high of 5.5 percent in 1998. In 2002 Cyprus hopes to be inside the 3 percent convergence criteria.
The public debt is expected to rise to 63.7 percent of GDP (3.75 billion Cypriot pounds or $6.11 billion) of GDP, compared to 61.8 percent in 2000, keeping it outside the 60 percent laid down by the Maastricht criteria. — (AFP, Nicosia)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
