Panayiotis Rougalas
Cyprus wasted no time in making its way back to the financial markets this year, setting its sights on raising around €1 billion through a 10-year government bond. As Kathimerini had already reported after the country’s last bond issue in 2025, the Republic was expected to return early in 2026, taking advantage of what are currently favorable market conditions.
The timing is helped by Cyprus’ strong standing with international credit rating agencies. The country is firmly in investment-grade territory, with ratings of A3 (stable outlook) from Moody’s, A- (positive outlook) from both S&P and Fitch, and A (stable outlook) from DBRS, a signal to investors that Cyprus is seen as a reliable borrower.
That said, 2025 marked a break from recent practice. While Cyprus had become used to tapping the markets every year, sometimes even twice a year, it chose to sit out last year. That decision drew some criticism, as many argue that countries should maintain regular contact with investors. In simple terms, Cyprus went quiet in 2025.
The government, however, defended the move. The Public Debt Management Office explained that updated financial forecasts from the Finance Ministry turned out better than expected, while state cash reserves were strong. As a result, the Annual Financing Programme was revised. Under the updated plan, announced in May 2025, borrowing for the year was capped at €360 million, with most funding coming from loans from international institutions rather than market borrowing.
Crucially, the state had more than enough cash on hand. Throughout 2025, Cyprus had sufficient reserves to cover its financing needs for the next 9 to 12 months. By the end of August, available cash covered roughly 1.4 times the country’s financing needs for the following year, keeping liquidity risk at very low levels.
Bank of Cyprus will take part in the new 10-year bond issue as co-manager, while Barclays, J.P. Morgan, Morgan Stanley, and Société Générale have been appointed as lead managers. The euro-denominated bond will mature in January 2036.
Looking ahead, the Ministry of Finance says the 2026–2028 period will be marked by manageable financing needs. Government funding needs are expected to amount to about 2.6% of GDP in 2026, rising to 3.2% in 2027 and 4.6% in 2028. In terms of debt repayments, Cyprus will need to refinance €2.29 billion in 2026, €2.53 billion in 2027, and €2.81 billion in 2028.
Why EMTNs matter
The government says European Medium-Term Notes (EMTNs) will remain its main borrowing tool over the 2026–2028 period. This is the same framework being used for the €1 billion bond planned for January 21.
Simply put, EMTNs allow Cyprus to borrow from a wider pool of investors beyond its own borders, reaching international markets and spreading risk across different types of investors. This broader reach usually translates into lower borrowing costs. These bonds are issued under English law, are listed on the London Stock Exchange, and are settled through the Euroclear and Clearstream systems.
Debt keeps falling
According to the European Commission, Cyprus’ public debt has been steadily shrinking. By the end of 2024, debt had fallen to 62.8% of GDP, down by more than eight percentage points in just one year. This downward trend is expected to continue, with debt projected to drop to 56.4% in 2025, 51% in 2026, and 45.7% in 2027.
The Commission also expects Cyprus’ economy to remain on solid footing. GDP growth is forecast at 3.4% for 2025 before slowing slightly to 2.6% in 2026 and 2.4% in 2027. In 2024, Cyprus posted a strong budget surplus of 4.1% of GDP, as state revenues grew faster than spending. Surpluses are expected to remain healthy in the coming years, at around 3% of GDP.
However, the Commission warns that the end of the Recovery and Resilience Plan in 2026 is likely to put some pressure on public finances in 2027.
A top-tier borrower
According to the Finance Ministry’s Medium-Term Public Debt Management Strategy for 2026–2028, Cyprus’ improved credit ratings in recent years have played a key role in making market access easier. The upgrades have helped lower borrowing costs and strengthened investor confidence, keeping Cyprus firmly in the top tier of government borrowers.
*Read the Greek version here.
