Cyprus Public Sector Payroll: Concern or Exaggeration?

The increase in Cyprus's public sector payroll and the potential risks to the economy have resurfaced, following disagreements between the government and the former President of DISY, Averof Neofytou.

Averof Neofytou expressed concerns about the increasing internal borrowing from the Social Insurance Fund, prompting an indirect response from President Christodoulides, who referred to the 60% reduction in public debt during his term.

The Minister of Finance, Makis Keravnos, acknowledged that public sector payments have increased by €1 billion compared to 2022 but dismissed alarmism regarding borrowing from the Social Insurance Fund. He also stated that a bill for the fund's independence would be prepared by the end of June.

Averof Neofytou criticized the government for the lack of measures despite the IMF's recommendations on the public sector payroll. The IMF has suggested, among other things, reducing overtime and abolishing the 13th salary.

According to the IMF, salaries in the Cyprus public sector are 27% higher compared to the private sector, while the public sector payroll accounts for 12% of the country's GDP.

Despite recommendations to abolish the Cost of Living Allowance (ATA), the Christodoulides government reinstated the ATA at 100%.

Members of DISY appear less concerned than Averof Neofytou, pointing out that the Social Insurance Fund is recording a surplus of €1 billion.