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25 July, 2024
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Cabinet pulls plug on fuel subsidies

Finance minister sets fiscal stability as priority, finds no economic justification to extend subsidy at the pump


Temporary fuel state subsidies are set to expire before the weekend in the Republic of Cyprus, after the finance minister announced an extension could not be justified.

Finance Minister Makis Keravnos emerged from a President’s Cabinet meeting on Wednesday, saying fuel subsidies could not be extended beyond June 30.

A reduction of sales tax on fuel prices at the pump had been implemented previously for a specific period, which was extended again, with critics calling for yet another extension.

But Keravnos suggested fiscal stability was a priority and responded to critics by saying “I think we are in a better position to know the state of public finances.”

Keravnos, a former banker who served on the Cabinet two decades ago, said the government had a monetary policy that focused on alleviating financial strain for the middle class and vulnerable groups

“And that’s is in a good state and we will not in any way allow there to be any concern about fiscal stability,” Keravnos said.

The Cabinet also decided to keep electricity subsidies by focusing on vulnerable households and farmers who use pumping stations to water crops.

Keravnos, a former banker who also served on the Cabinet two decades ago, said the government had a fixed monetary policy that would focus on alleviating financial strain in middle class and vulnerable groups.

Local media reported that groups eligible for power subsidies included low income subsidy recipients, persons who live with a disability, people unable to work including pensioners in that same category, large families, single parents, and the unemployed.

The decision came days after local gas station managers called on the government to take measures to prevent motorists from the Greek Cypriot south to fill up their tanks in the Turkish Cypriot north, where prices are much cheaper.

After Keravnos suggested all economic justifications for the fuel subsidy had been exhausted, gas station owners sought environmental restrictions citing higher pollutants in northern gasoline, a claim rejected by Energy Minister George Papanastasiou.

The energy minister clarified that authorities could combat only illegal trade, adding that motorists were free to fill up in the north.

“It is up to the individual to decide if that is right or wrong,” Papanastasiou said.

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