Panayiotis Rougalas
Cyprus is expected to close 2025 with a public debt-to-GDP ratio of 55.3%, well below its target of 60%, the Finance Ministry said.
Finance Minister Makis Keravnos told parliament that public debt is on a steady decline and is projected to fall further to 50.9% of GDP in 2026. Analysts attribute the improved performance in part to Cyprus’s decision not to tap international markets in 2025, which kept public borrowing in check.
Next year, the country is expected to return to the markets to meet higher financing needs and maintain engagement with investors. Total debt maturities for 2026 are projected at €2.29 billion, or 2.6% of expected GDP. The government aims for roughly 75% of gross financing needs from 2026–2028 to come from external sources, mainly through international EMTN bond issuances.
At 55.3%, Cyprus’s debt-to-GDP ratio compares favorably with the eurozone and EU averages. According to Eurostat data for the second quarter of 2025, Cyprus’s debt stood at 61.2%, compared with 88.2% in the eurozone and 81.9% in the EU.
Fifteen EU member states saw their debt-to-GDP ratios rise in the second quarter of 2025 compared with the first quarter, while twelve reported declines. The largest increases were recorded in Finland (+4.3 percentage points), Latvia (+2.7), Bulgaria (+2.6), Portugal (+1.8), France (+1.7), and Romania (+1.4). The largest declines were in Lithuania (-1.4), Ireland (-1.2), and both Greece and Luxembourg (-1.1).
Revised borrowing plans
In November 2024, the Public Debt Management Office set a borrowing ceiling for 2025 at €1.46 billion, including €1 billion in EMTN benchmark bonds, €200 million from supranational loans, and the rest from domestic sources such as Treasury bills and bonds.
In May 2025, following stronger-than-expected fiscal forecasts and solid cash reserves, the government revised the Annual Financing Program. The new plan reduced the maximum approved borrowing to €360 million, mostly through loans from supranational institutions. From January to August 2025, the government borrowed about €42 million, 17.5% of the revised annual ceiling, excluding short-term Treasury bills.
Medium-term outlook
The government projects that financing needs for 2026–2028 will remain manageable, ranging from 2.6% to 4.6% of GDP. Specifically, gross financing needs are expected to be 2.6% in 2026, 3.2% in 2027, and 4.6% in 2028. The fiscal balance is expected to remain strong.
However, risks persist, including the ongoing Russia-Ukraine war, volatility in the Middle East, potential impacts from U.S. tariffs on the EU, and public spending pressures from climate change. Any negative developments could slow the reduction of debt relative to GDP and affect Cyprus’s credit rating, increasing borrowing costs.
“The probability of increased market volatility due to ongoing geopolitical tensions, persistent fiscal challenges in some member states, and higher defense and infrastructure spending is considered an adverse scenario,” the Ministry said.
The government noted that its strong cash position significantly reduces these risks.
