Cyprus maintains positive fiscal outlook despite global debt rise

The International Monetary Fund (IMF) has reported that Cyprus is expected to maintain a fiscal surplus of 2.64 per cent of GDP in 2026, while continuing a steady decline in public debt levels.

According to the IMF’s April 2026 Fiscal Monitor, Cyprus is projected to record a net lending position of 2.64 per cent in 2026, down slightly from 2.99 per cent in 2025 and projected to ease further to 2.5 per cent in 2027.

The country’s primary balance is also expected to remain strongly positive, reaching 3.72 per cent of GDP in 2026, compared with 4.07 per cent in 2025 and 3.62 per cent in 2027.

At the same time, the cyclically adjusted balance is forecast at 1.88 per cent of potential GDP in 2026, compared with 2.02 per cent in 2025 and 1.86 per cent in 2027.

The cyclically adjusted primary balance is projected at 2.69 per cent in both 2026 and 2027, slightly below the 2.83 per cent recorded in 2025.

On the revenue side, the IMF expects a gradual decline, with government revenue falling from 43.39 per cent of GDP in 2025 to 42.76 per cent in 2026 and 41.71 per cent in 2027.

Government spending is also projected to decrease, with expenditure declining from 40.41 per cent of GDP in 2025 to 40.12 per cent in 2026 and 39.21 per cent in 2027.

As a result, Cyprus is forecast to continue improving its fiscal position, supported by both falling expenditure and sustained surpluses.

The IMF highlighted a significant reduction in gross public debt, which is expected to fall from 55.3 per cent of GDP in 2025 to 50.88 per cent in 2026 and 46.56 per cent in 2027.

Similarly, net debt is projected to decline sharply, from 24.93 per cent of GDP in 2025 to 21.12 per cent in 2026 and 17.76 per cent in 2027.

The IMF explained that the latest edition of its Fiscal Monitor provides an assessment of global public finance developments, including updated projections and analysis of fiscal sustainability.

It also outlines policy recommendations aimed at maintaining sustainable public finances, based on country-level data compiled by IMF staff.

The data used in the report are drawn from the April 2026 World Economic Outlook database, reflecting ongoing analysis and updates from IMF country teams.

Globally, the IMF warned that public debt rose to just under 94 per cent of GDP in 2025, with projections indicating it will reach 100 per cent by 2029, earlier than previously expected.

This increase is being driven primarily by major global economies, placing additional pressure on public finances.

The report stated that governments are facing mounting spending demands related to social needs, defence, and strategic autonomy, alongside rising borrowing costs.

It also highlighted that the fiscal impact of the Middle East conflict is adding further strain, increasing uncertainty in global markets.

Structural changes in debt markets, including the growing role of leveraged non-bank intermediaries and reduced safety premiums, are further amplifying risks.

The IMF stressed that credible and well-sequenced fiscal adjustment is urgently needed across all economies to address rising vulnerabilities.

Cyprus stands out for its continued fiscal surpluses and declining debt trajectory, despite the challenges facing the island’s tourism sector, positioning the country relatively favourably compared with broader global trends.