Filenews 14 April 2025 - by Theano Thiopoulou
The size of the state machine and the salaries of civil servants is something that seems to be of great concern to the International Monetary Fund (IMF) according to the "Managing Government Employment and Compensation (Technical Assistance Report)" published on its website on Friday, April 11 and compiled in November 2024, before the global turmoil due to the tariff measures began.
It should be clarified that a mission of the International Monetary Fund met with the Cypriot authorities during the period 17-28 March 2025, to discuss recent economic developments, prospects and risks, as well as policy priorities and there was a relevant statement.
In the report published on Friday, it is noted that salaries in the public sector in Cyprus are 27% higher than in the private sector even after taking into account factors such as educational level and age. This difference reaches 32% for higher education graduates and escalates according to age, reaching 35% for workers over 50 years of age. Every year it is indicated by the IMF, staggered increases are granted, which are more frequent than in many countries, and are comparatively very large.
In addition, compensation is automatically linked to inflation, which is rarely done elsewhere. The fact that there are no particular difficulties in recruiting or leaving the public sector is a clear indication that the level of remuneration exceeds what is necessary to maintain the attractiveness of public positions.
It is emphasized that the government workforce of Cyprus is modest in size, but the average wage is high according to the estimates cited by the IMF. In 2023, general government spending on workers' wages was 12% of GDP. This is a high percentage based on the IMF report, compared to OECD countries and other advanced economies and EU countries.
According to the IMF, in order to create fiscal space, the government's priority is to limit the increase in government wage levels as opposed to employment levels, and they explain that although the size of the workforce is comparatively modest, the authorities could gradually reduce it slightly. This is best accomplished by identifying non-critical positions and removing them as soon as they become vacant. However, it is emphasized, the slowdown in wage growth offers greater possibilities. This is best accomplished by suspending the ATA for public employees or reducing their indexation rate to less than two-thirds of inflation and increasing the time it takes for workers to move to the next scale. As a last resort to contain costs, the IMF proposes to reduce overtime or even abolish the 13th salary, although it acknowledges that such interventions are socially and politically sensitive.
