Cyprus executed 25% of its €1.62 billion development budget during the first six months of 2026, matching the pace recorded a year earlier and remaining above the 10-year average, according to the state treasury. By the end of June, €412.39 million had been spent under the development budget, maintaining the same implementation rate as in the first half of 2025.
Revenue Growth Driven By Higher Tax Receipts
State revenue reached €4.44 billion in the first half of the year, equal to 41% of the annual target, up from €4.21 billion during the same period of 2025. The increase was largely driven by tax collections. Indirect tax revenue rose by €170 million, while direct taxes increased by €90 million.
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Value-added tax receipts climbed to €1.68 billion from €1.48 billion a year earlier, helping lift indirect tax revenue by 8% to €2.29 billion. Direct taxes rose 6% to €1.58 billion, supported by an additional €100 million in corporate and personal income tax receipts.
Spending Increased Across Social Benefits And Transfers
Government expenditure totalled €4.63 billion, representing 40% of the annual budget, compared with €4.41 billion in the first half of 2025.
Higher spending reflected a €110 million increase in transfers and grants, an €80 million rise in operating and other expenses, and €50 million in additional social benefits.
Payroll, pensions and gratuities remained broadly unchanged at €1.63 billion, while social benefit spending increased 5% to €960 million. Transfers and grants climbed 12% to €960 million, driven primarily by higher contributions to the EU budget and the Social Insurance Fund.
Operating expenditure also increased to €430 million from €350 million, largely due to higher defence, policing and general operating costs. Financing costs moved in the opposite direction, declining to €390 million from €410 million.
Debt Activity Accelerated
Government borrowing activity increased significantly during the first half of the year. Loan drawdowns and repayments received reached €1.25 billion, compared with just €30 million a year earlier, while debt repayments and loan issuance rose to €2.09 billion from €110 million.
Development Spending Focused On Infrastructure
Capital investment under the development budget reached €140.8 million. Road infrastructure accounted for the largest allocation at €29.4 million, followed by construction projects (€25 million), government buildings (€17.5 million), equipment (€14.4 million), school buildings (€10.7 million), and water and sewage infrastructure (€5.3 million).
EU Programmes And Universities Received Continued Support
Co-financed projects and targeted programmes received €105.7 million, including funding for childcare support, industry and technology initiatives, home affairs programmes, energy-efficiency schemes, electromobility and sustainable urban mobility.
Universities and research institutions received €115.1 million in grants. The University of Cyprus received €64.2 million, followed by the Cyprus University of Technology with €34.4 million, the Open University of Cyprus with €5.5 million, the Cyprus Institute with €3.9 million and the Cyprus Institute of Neurology and Genetics with €2.6 million.
Full-Year Budget Targets Moderate Growth
The 2026 budget projects revenue of €10.78 billion, up 5% from 2025, while expenditure is expected to increase 3% to €11.44 billion. Higher revenue is expected to come mainly from direct taxes and grants, while additional spending will largely reflect increased operating costs.
