Filenews 25 October 2025 - by Theano Thiopoulou
The distribution of public debt at the end of 2025 differs slightly from the corresponding distribution at the end of 2024 in terms of borrowing from official sources, related to loans from the European Investment Bank and the Council of Europe Development Bank, which were the main source of financing.
Specifically, according to data from the Ministry of Finance at the end of 2025, most of the public debt is concentrated in foreign bonds, which are projected to amount to about 57% of the outstanding debt. The second largest category of public debt concerns official borrowing, most of which consists of European Stability Mechanism (ESM) loans, which is projected to approach around 39% of total debt compared to around 38% at the end of 2023. This is due to the reduction of public debt in absolute numbers (denominator effect). The weighted average cost of servicing public debt is projected to decrease slightly due to the continuous reductions in the key ECB interest rates observed this year and the reduction in funding in 2025, and will amount to around 1.75% at the end of 2024, compared to 1.77% at the end of 2024, based on data cited by the Ministry of Finance.
The moderation of the average cost of servicing public debt in 2025 is partly due to the positive impact of low borrowing costs from the ESM, reduced funding in view of the Republic of Cyprus' cash needs covering most of the financing needs, as well as positive upgrades in the credit rating of the Republic of Cyprus. The Ministry states that although the level of key interest rates by the ECB is expected to remain at similar levels to today's levels with a positive impact on the cost of servicing the public debt, the continuation of the war between Russia and Ukraine and the volatile environment in the Middle East create conditions of uncertainty and risk in the economy that may change this picture in combination with the fact that the refinancing of public debt in the coming years is expected to be invoiced at a higher interest rate.
As regards the picture of the key public debt risk indicators as they will be formed at the end of 2025, they are projected to be at similar levels to those of the previous year. Variations are projected to occur in the average remaining debt maturity and in the average debt servicing costs. Specifically, it is estimated that the average remaining debt maturity will stand at 5.7 years from 6.7 years at the end of 2025. Through the implementation of the Medium-Term Public Debt Management Strategy, the GDL seeks, among other things, to maintain the weighted average maturity of the debt at levels comparable to the EU average through new medium-term bond issues, but taking into account market conditions. The debt ratio at a variable interest rate, although projected to decrease in absolute terms, as a percentage of outstanding debt will be at the same level as last year as a result of the reduction of public debt (denominator effect). Cash and cash is projected to continue to exceed the financing needs of the next 12 months at the end of 2025, meeting the target set in the Medium-Term Public Debt Management Strategy.
