Insider Business Government deficit increases as a result of CCB sale

Government deficit increases as a result of CCB sale

The government registered a deficit of €1.050b  in the third quarter of 2018 after the Statistical Service, in coordination with Eurostat, classified the two entities created after the closure of the Cooperative Bank (CCB) within the General Government sector.

The €1.050.0 b deficit  quarter of 2018 compares to a surplus of € 366.7 million in the corresponding period of the previous year, based on the preliminary data of the General Government`s financial accounts. Total revenues amounted to €2.1636 b and total expenses to €3.2136 b.

The main categories of revenue for the period July-September 2018 were: taxes on production and imports €854.7 m (11.1% increase as compared to the third quarter of 2017), of which net VAT was €535.3 m (14.6% increase), taxes on income and wealth €632.5 m (0.4% increase), and social contributions €444.9 m (10.3% increase). Revenue from the sale of goods and services reached €152.9 m registering an increase of 9.3% as compared to the corresponding period of the previous year.

The capital account recorded an expenditure of €1.5957 b (€715.2 n investment and €880.5 m capital transfers) as compared to €98.4 m during the corresponding period of 2017 (€91.6 m investment and €6.8 m capital transfers).

The remaining categories of expenditure for the period July-September 2018 were: social transfers €605.6 m (3.7% increase compared to the corresponding period of 2017), and compensation of employees (including imputed social contributions and pensions of civil servants) €572.5 m (5.0% increase). Intermediate consumption reached €174.7 m (15.8% increase as compared to the corresponding period of the previous year).

A negative investment of €710 m
——————————-

According to the Statistical Service, the sale process of parts of the assets and liabilities of the Cyprus Cooperative Bank Ltd (CCB) to Hellenic Bank resulted in the establishment of two new entities, namely the Cooperative Asset Management Company Ltd (SEDIPES) and Cyprus Asset Management Company Ltd (KEDIPES), which received assets with a book value of €8.34 b in return of a liability of €3.54 b. Upon examination of the sale process details and taking into consideration the legal status of the new entities, the Statistical Service has classified both entities within the General Government sector.

The fiscal burden of €1.5 b in the revised fiscal accounts of the third quarter that resulted from the above transaction is analysed as follows:

Non-performing loans (NPLs) of nominal value amounting to €6.97 b are an asset of the new entities. The real economic value of these NPLs has been estimated by CYSTAT to be 20.94% of the nominal value, i.e. decreased by 79.06%.

Therefore, the estimated real economic value of the NPLs received by the new entities is valued at €1.46 b. According to this valuation, a negative investment of €710 m is observed and recorded in fiscal accounts, which is the result of the acquisition value (€2.17 b) minus the real economic value of NPLs (€2.17 b – €1.46 b = €710 m).

Further to this negative investment, an expenditure of €625 m, which corresponds to the share of the collateral received from the former CCB and concerns its fixed assets, is recorded as investment. This investment increases the capital assets and hence the net worth of the General Government by the same amount.

Finally, CyStat also recorded as expenditure the guarantee of €155 m (contingent liability) received by Hellenic Bank.

(Cyprus News Agency)

Top Stories

91 new cases of COVID-19 on Monday

The Health Ministry announced 91 new COVID-19 cases on 26 October, out of 2,285 laboratory tests, taking confirmed infections to 3,636. The break-down of new...

Bottled water withdrawn from Cyprus market

The Health Ministry is informing consumers that within the framework of the officials tests conducted in the market, the Ministry’s health services have tested...

President: Attack against Macron insults European values

In a written statement, President Anastasiades said that this attack, against the French President from the leader of a country which is candidate for...

Finance Minister: No lockdown forseen in 2021 state budget

Minister of Finance Constantinos Petrides called on MPs to approve the 2021 state budget given the critical moments facing Cyprus due to the coronavirus...

Mitsotakis-Anastasiades have working lunch

Prime Minister Kyriakos Mitsotakis on Monday had a working lunch with Cyprus President Nicos Anastasiades. According to government sources, during the lunch they discussed Turkey's...

Taste

Squash soup

Ingredients: 1 kg pumpkin, cut into small cubes, approximately 5 cups 2 medium (400g) sweet potatoes, cut into cubes, approximately 2 ½ cups 1 chopped leek, only...

Mezedes

No visit to Cyprus is complete without enjoying the traditional meal of many small dishes known as ‘meze’. This large feast, which has been a...

Prawns with fried cheese, barley shaped pasta

Put the barley shaped pasta into a small pan with salted water, bring to a boil and when tender, drain. Peal the prawns leaving...

Salmon and shrimp sheftalies

Mix all ingredients for tabbouli in a bowl and keep to one side so flavours can combine. Prepare the sheftalies: wash and soak the casing...