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Cyprus Achieves Largest Debt Reduction in Eurozone

Cyprus made significant strides in reducing its government debt, with the debt-to-GDP ratio falling to 70.5% by the end of the second quarter of 2024, according to Eurostat. This represents the largest decrease in the eurozone, with a 2.1% drop from Q1 2024 and a notable 10% reduction from Q2 2023.

In contrast, both the eurozone and the EU saw slight increases in their debt-to-GDP ratios. The eurozone’s ratio increased to 88.1% (up from 87.8% in Q1 2024), and the EU’s rose to 81.5% (up from 81.3%).

Despite Cyprus’ success, some countries continue to struggle with high debt levels. Greece and Italy recorded the highest ratios at 163.6% and 137.0%, respectively. Meanwhile, Bulgaria and Estonia maintained the lowest ratios at 22.1% and 23.8%.

The eurozone’s government debt is largely composed of debt securities, accounting for 84% of the total, while intergovernmental lending made up 1.5% of GDP.

Cyprus’ impressive debt reduction stands in contrast to the increases seen in countries such as Finland and Austria, demonstrating the country’s effective fiscal management amid global economic pressures.

Cyprus 2025 State Budget: A Detailed Analysis Of Revenue And Expenditure Implementation

Budget Overview

Cyprus recorded an 87% revenue implementation rate and a 92% expenditure implementation rate in the 2025 state budget, according to the latest Treasury report. Total revenue reached €10.20 billion, compared with €10.81 billion in 2024, while total expenditure amounted to €11.99 billion versus €12.42 billion a year earlier.

Revenue Trends And Tax Contributions

The decline in revenue was mainly linked to a €1.07 billion drop in loan withdrawals. This was partly offset by stronger tax collection. Direct taxes increased by €0.37 billion, while indirect taxes rose by €0.17 billion.

VAT revenue grew by 4% to €3.16 billion, reflecting an increase of €0.08 billion. Direct taxes rose by 6% to €3.79 billion, supported by higher personal and corporate income tax receipts.

Expenditure Dynamics And Social Investments

Overall expenditure declined slightly, largely due to a €0.84 billion reduction in loan repayments. At the same time, social benefits increased by 5% to €2.02 billion, mainly driven by an €0.08 billion rise in healthcare-related spending.

Transfers and grants rose 11% to €1.93 billion, reflecting higher contributions to the Social Insurance Fund and increased support for municipalities. Operating expenses fell by 3% to €1.12 billion, while payroll, pensions, and gratuities remained stable at €3.52 billion.

Capital Expenditure And Co-Financed Projects

Capital expenditure reached €469.3 million. Key allocations included road infrastructure (€97.3 million) and construction projects (€77.4 million), alongside investments in water systems, government buildings, and school expansions.

Co-financed projects implemented €336.3 million. Funding covered initiatives such as subsidies for childcare and nutrition programs for children under four, as well as residential energy-efficiency upgrades.

Comparative Analysis And Development Expenditure

The average state budget expenditure implementation rate over the past decade stands at 91%. Development expenditure implementation reached 81% in 2025, exceeding the ten-year average of 69%.

The data indicates continued fiscal discipline combined with increased execution of development projects and targeted social spending.

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