No new fuel taxes in Cyprus, says FinMin

Cypriot Finance Minister Constantinos Petrides said on Tuesday that no new taxes will be imposed on fuel taxes, an obligation that should be met by the end of the year.

Speaking at the 18th Annual Economist Conference in Cyprus, sponsored by Kathimerini, the minister said that the strict implementation of the green transition should be partially revised in order to mitigate the economic consequences. “We have to be realistic; this is not the time for new fuel taxes, and we will not impose them,” he said.

Petrides explained that four factors have contributed to inflationary trends. The first, he claimed, is the result of years of expansionary monetary policies with zero and negative interest rates. The second is the Covid-19 pandemic, because all countries, including Cyprus, were called upon to avert its consequences and had to pour money into the market to keep the economy open. The third factor, according to the minister, is the consequences of Russia’s war in Ukraine, while the fourth is the green transition. “I don’t believe inflation will persist, but energy prices will remain high,” the minister said.

Petridis went on to note that, in the context of the pandemic, Cyprus has spent 3 billion euros to support the economy, and that the state has already spent €360-370 million to address energy and fuel shortages in 2022. “We will have to make a lot of investments to wean ourselves off of fossil fuels; we have already moved to invest €150 million for this purpose, up from €7 million previously,” he said.

Petrides further stated that the economy is a tough domain, which is why states should not act in a piecemeal manner, but that spending should always be sustainable. “During an election period, it would be very easy for the government to give subsidies that would result in a 3%-4% deficit, a threshold that is already allowed, and we would have no problem from the [European] institutions; we offer support where it is needed, and we hope that the new government will manage public finances wisely.”

The minister argued that Cyprus’ growth is not a coincidence: “It is thanks to a well-planned financial policy, with Cyprus becoming a magnet for foreign companies in IT and high technology.”

The 18th Annual Cyprus Summit by The Economist concludes on Wednesday.