NICOSIA, — Cyprus’s parliament passed the 2016 state budget on Thursday — the last one under a three-year financial support program by international lenders.
The budget approval comes just three months before Cyprus ends a three year economic adjustment program under a bailout agreement with the Eurogroup and the International Monetary fund in March 2013.
The eastern Mediterranean island was offered a 10-billion-euro economic assistance package after 11 consecutive quarters of recession and a four-year exclusion from international markets.
Finance Minister Harris Georgiades said while opening the two-day debate on the budget in parliament on Tuesday that it will help the economy to achieve a 1.5 percent growth in 2016, after an estimated growth of 1.8 percent this year.
Georgiades said that despite the recovery of the economy and the end of the adjustment program the government will apply all provisions of the bailout memorandum, including the reform of the public service and the privatization of state owned operations, such as telecommunications and ports.
The budget provides for an expenditure of just over 7 billion euros, or 39 percent of Cyprus’ annual economy of about 18 billion euros.
Governing DISY party, which holds 20 seats in the 56-member parliament, had to rely on the votes of eight deputies of the center opposition DIKO party and a single-seat party to have the budget approved, by a 29 to 26 majority, after all other left-wing opposition parties and an independent lawmaker voted against.
Main left-wing AKEL opposition party, which musters 19 seats, one less than DISY, accused the government of continuing its austerity policies which have mostly hit the poorer sections of the population.
But DISY retorted that is was an AKEL government which led the economy into ruins during its five-year term and allowed international lenders to have a say in economic planning.
“Next March we’ll have the successful completion of the three-year period in which the country had to recover, stabilize and regain respect,” said DISY leader Averof Neophytou.
But he conceded that the country still faces major problems, such as high debts and non per-forming loans and a high rate of unemployment.
The government said the budget provides for a 5 percent increase in development funds which it said will help sustain economic growth until a stable recovery is achieved.
Georgiades has said that he expects an acceleration in the restructuring of non-performing loans, which had topped 27 billion euros or close to 47 per cent of total loans, after the restructuring of the banking system in 2013.
He said a drastic reduction of red loans will enable the banks to finance productive projects, as consumption is currently the major factor behind economic recovery, generating 75 percent of the expansion of the economy achieved so far.