The coronavirus pandemic has eroded the resilience of state finances, which is why the Finance Ministry is working to raise extra cash.
Phileleftheros reports that there are two scenarios as regards the state’s financial needs until the third quarter of 2021.
In the basic scenario the state will need €3.6 b with the economy projected at shrinking by 10%. In the extreme scenario, additional financial needs will be €5 b and the economy will shrink by 13%.
State coffers currently have €3.45 b of which €1.75 b was raised earlier this month when the government tapped the markets.
The figures were given by Finance Ministry permanent secretary Yiorgos Panteli at a teleconference with the House Finance Committee yesterday.
The state is also expected to raise €750 m with a domestic bond issue.
This will bring the amount of cash available to €4.2 b which will cover the basic scenario but will fall short of the extreme scenario by €800 m. Part of it will covered by EU and European Investment Bank programmes. The possible issue of another bond is also under consideration, as are savings from the budget by reducing spending on development projects.
The 2020 budget had projected a €600 m budget but Cyprus is now looking at a deficit of €1.15 b to €1.6 b.
The committee heard that with borrowing of €750 m from the banks and other local organisations, the public debt will rise to 120% of GDP.
The financing needs of the state were revealed after some party leaders questioned data given by the Finance Ministry during a meeting with President Nicos Anastasiades, attended also by the finance minister and the governor of the Central Bank .
At the meeting the president made clear to party leaders that the state cannot offer direct financial support to businesses. And he appealed to the parties to approve the bill of state guarantees for bank loans.
Central Bank governor Cosntantinos Herodotou told the meeting that the ECB has indicated that the state cannot continue to borrow domestically.
Parties questioned the credibility of the banks with Diko suggesting loans of €300 m be given to small companies with 100% state guarantee. The government proposal is for the state guarantee to total 70% of the loan.
Phileleftheros also reports that the government and Diko are close to reaching consensus as regards the bank guarantee bill after the party cited its red lines to ensure transparency and proper checks.
Any decision by parliament will be taken after Easter.
The meeting with party leaders also discussed lowering rents with the government undertaking to look at what other countries have done, while noting the legal difficulties.
It was also suggested that front line workers receive a special subsidy.
By Eleftheria Paisanou