THE situation for the major municipalities in Cyprus is going continuously downhill due to the desperate economic crisis they are facing.
Loan debts alone amount to £98.1million, with the municipality of Limassol being in the deepest waters, owing £46.1 million.
Nicosia Municipality owes the least with £10.6 million, while Larnaca and Paphos owe £28.7 million and £12.7 million respectively.
The Municipalities Union have been seeking to merge all their loans into one single loan, which will be able to be repaid over a long period of time, will be low in interests and will have a long period of grace.
The Cabinet finally agreed earlier this month, approving the creation of a new loan, amounting to £150 million, guaranteed by the government towards all 23 Municipalities, with the sole purpose of repaying all the outstanding debts.
Although joining the loans will offer some breathing space to the Municipalities, this is not a long-term solution as it still means they are in serious debt.
It is common knowledge that the Municipalities are facing serious financial problems. There is not enough money to deal with day-to-day business and Auditor-general Chrystalla Yiorkadji’s annual reports confirm this, going as far as warning of a financial collapse.
Yiorkadji has repeatedly suggested that the Municipalities prepare an austerity programme, with the aim of reducing excesses and stabilising budgets.
One of the most regular observations of the Auditor-general is that certain Municipalities are late paying their debt installments, making the interest payments hit the roof.
The Municipality of Limassol, for example, due to serious financial difficulties, was late paying installments, making interest reach £12 million in 2002. The joining of the debts will ease this specific problem.
Another important issue is the fact that in certain Municipalities the overdraft limit well exceeds the specified 20 per cent of income.
Budgets in most cases are permanently deficient. For example, in 2002 the Municipality of Nicosia had a £4.166 million deficit.
The four major Municipalities of Nicosia, Limassol, Larnaca and Paphos pay £25.5 million for their staff alone, with overtime expenses going up by 197.4 per cent from 2000 to 2003 in Nicosia.
