Cyprus parliament approves 2016 budget as country's rescue program set to wrap up

NICOSIA, Cyprus – Lawmakers in Cyprus on Thursday approved the budget for 2016 when the European Union member country expects to wrap up a rescue program that saved it from financial meltdown.

The budget passed with 29 votes in favour in the 56-seat parliament.

Three years of creditor-mandated fiscal belt-tightening and reforms have put Cyprus’ economy on the mend, with growth next year expected to reach around 1.5 per cent of gross domestic product — the highest in seven years.

The budget deficit will be “close to zero,” Finance Minister Harris Georgiades earlier told lawmakers, adding that reforms and tightfisted spending — including shrinking a large public sector — would continue.

The March 2013 bailout deal forced a seizure of uninsured deposits in the country’s two largest banks and the closure of the smaller lender.

“The budget we have before us signals Cyprus’ exit from the bailout program,” Averof Neophytou, leader of the ruling, right-wing party DISY said at the start of the two-day budget debate.

Strong tourist arrival numbers along with resilient services and shipping sectors have buoyed the economy and helped beat gloomy projections of a prolonged recession.

But the small east Mediterranean country continues to face challenges including 15 per cent unemployment and a huge number of bad loans that are putting a drag on growth.

Although dropping, public debt remains high at an estimated 105.1 per cent of GDP for 2016.

“The rich are getting richer and the poor are getting poorer,” said Andros Kyprianou, leader of the left-wing, main opposition party AKEL. “That’s the success story that this government is congratulating itself for.”