Budget is ‘balanced and sensitive’

THE FINANCE Minister yesterday described the 2009 budget as “a balanced, sensitive and high social development budget”.

The budget, the first for the new government, was prepared before the global crisis hit and is categorised into ‘three pillars’.

Total spending is earmarked to increase 10.9 per cent to €7.4 billion while revenue has been revised to €6.2 billion from €6.4 billion due to the global crisis, but it was still up 1.6 per cent on 2008, Stavrakis said.

The first pillar of the government in the new budget is social spending, which is set to rise 27 per cent next year, the biggest increase in recent years. The second is speeding up of 30 new multi-million major development projects, and the third is to further reduce public debt as a percentage of GDP from 60 per cent at the end of 2007 to 45 per cent by the end of 2009.

Stavrakis said it should be taken into consideration that the budget was compiled based on the first nine months of the year, before the global crisis hit worldwide.

Direct taxes – income tax, corporation tax and capital gains tax – is also expected to be down 3.1 per cent in 2009.

While indirect taxes such as VAT and import duties are projected to show a slowdown in 2009, they will still be 7.0 per cent up compared with 2008.

Development costs are budgeted for €1.09 billion compared to €948 million in 2008, an increase of 15.5 per cent for the 30 projects, none of which will cost less than €1 million. Road projects will be the biggest recipients,

Health spending will include the extension of Larnaca Hospital, the creation of a radio-therapy centre in Limassol Hospital and an increase in spending on health care.

Other projects include the creation of desalination units, the installation of photovoltaic system and heating/cooling in public buildings.

“I want to stress emphatically that you do not need at this stage, a revision of budget expenditure,” Stavrakis told deputies at the House.

He said the reduced revenue due to the global economic recession, which is estimated at around €165 million will be offset to some extent by savings, due to the expected decline in inflation and interest rates.

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