NICOSIA (AFP) - Cyprus must still adopt 351 million euros (S$557 million) in austerity measures in its 2013 budget before receiving the EU financial aid expected in May, according to a bailout agreement signed with international lenders.
"Over 2013, the authorities will rigorously implement the 2013 budget law with additional permanent measures of at least 351 million euros (2.1 per cent of GDP)," says the memorandum of understanding, seen by AFP.
Those measures "will be presented for review by programme partners before submission to the House of Representatives, and shall be adopted prior to the granting of the first disbursement of financial assistance," the MoU said.
To meet its fiscal targets, the government will have to adopt a number of measures in addition to pay cuts in the public sector and benefit cuts for it and the private sector already adopted. Where legally possible, they will be retroactive to January 1.
On the revenue side, this will include:
- Raising corporate income tax from 10 per cent to 12.5 per cent;
- Hiking the tax rate on interest income to 30 per cent;
- Raising property taxes to generate 75 million euros;
- Increasing by at least 17 per cent the duties and fees paid on public services, such as stamp duty and obtaining a passport;
- Adjusting by June the road tax on motor vehicles to favour environmentally friendly principles.
On the spending side:
- The government must save 36 million euros by ending grants for acquiring first residences and end the practice of providing loans and loan guarantees related to house construction and acquisition;
- Easter allowances to pensioners must be limited to persons with a monthly per capita pension of maximum 500 euros
- A scaled reduction in state and broader public sector pensions, running from 0.8 per cent on up to 2,000 euros a month to 2 per cent above 4,001 euros.
Under the deal, the government is forecast to have a primary deficit of no more than 395 million euros (2.4 per cent of GDP) in 2013. That will gradually moved towards a surplus of 3 percent in 2017 and 4 percent in 2018.
Austerity measures to be implemented over the bailout adjustment period, originally until 2016 but now 2018, represent 7.25 per cent of GDP, the finance minister said in December.