The big fiscal breath for the state coffers will come in 2029, as the total needs for loan repayments are reduced by 50.3%, to €1.36 billion, thanks to the sharp drop in external debt maturities compared to 2028.
At the same time, the cost of servicing public debt (net interest and expenses) continues its uninterrupted upward trajectory for the third consecutive year, recording a new increase of 9.9% and climbing to an all-time high of €917.70 million. in 2029.
For the next year (2027), expenditure on servicing the public debt (interest and repayments of foreign and domestic loans) shows an increase of 10.1% and is specifically estimated at €3.23 billion. compared to €2.93 billion. in 2026. Service interest is estimated at €665.24 million. in 2026 and €711.41 million. in 2027.
The numbers show that while Cyprus is temporarily relieved of the burden of returning large funds to foreign creditors, interest rate pressures continue to inflate the annual cost of debt maintenance and confirm that the country is committing valuable resources to cover its interest.
The submission of the 2027-2029 budget highlights what will happen until we reach 2029, based on the three-year medium-term fiscal framework.
Flashback
The fund for the repayment of foreign creditors has been the main cause of burden in previous years, recording a continuous increase (+31.9% in 2026, +12.4% in 2027 and +10.1% in 2028) until it reached a peak of €2.65 billion. in 2028.
In 2029, however, repayments are reduced by more than half (-52%), falling to €1.27 billion. marking the end of a long period of maturity of external loans.
In stark contrast to the fall in repayments, the cost of servicing the debt (interest) does not stop rising. After a temporary decrease in 2025 (-18.1%) and 2026 (-7.6%), interest rates went uphill again: 2027: €711,411 (+6.9%), 2028: €834,963 (+17.4%), 2029: €917,703 (+9.9%).
The analysis of the data shows that domestic debt is steadily reduced. From €391,509 in 2024, repayments fell to €40,371 in 2029, recording a final mild decrease of -2.6%. The granting or issuance of new loans by the state remains completely stable and "locked" at €50,000 per year for the three-year period 2027 – 2029 (0.0% change).
The Role of Interest Rates
The continued rise in public debt servicing, despite the reduction in capital, is explained by the pressures of the international markets. When older government bonds, which were contracted at historically low interest rates, expire, the state is forced to proceed with more expensive refinancing. New debt issuances are burdened by the increased interest rates of central banks and so in 2029 the economy is trapped in a "trap", where the interest instalment reaches an all-time high of €917.7 million. limiting the benefits of reducing principal repayments.
Despite the increase in the annual cost of interest due to interest rates, the management strategy is bearing fruit in terms of the overall size of the debt.
The data show a continuous and steady decline in public debt, both in absolute terms and as a percentage of Gross Domestic Product (GDP). In 2024, debt stood at €21.13 billion. reaching 60.8% of GDP and in 2025 fell to €19.53 billion. (53,5%). In 2026, it is expected to decline to €18.37 billion. (47.5% of GDP), indicating the country's steady deleveraging trajectory. In 2027, it is forecast to decline to €17.81 billion. (43.8% of GDP), in 2028 to €16.71 billion. (39.5%. The downward trend is expected to be completed at the end of the three-year period (2029), falling to €16.204 billion, reducing the burden of public debt to 36.1% of GDP.
