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In a recent report released by the International Monetary Fund (IMF), the gap between salaries in the public and private sectors in Cyprus has been laid bare; public sector wages are 27% higher, with the discrepancy reaching 32% among those with higher education qualifications. But when factoring in age, the difference balloons to a staggering 50% for employees over 50 years old.
The report, published on April 11, 2025, reflects data gathered in November 2024 and paints a picture of a public sector that the IMF considers well-compensated compared to private industry standards, especially when compared to salaries in other European Union nations.
Despite this, the IMF emphasized that while the public sector is “medium-sized,” it faces an ongoing need for fiscal adjustments. The global financial body has called on the Cypriot government to curb future pay increases for civil servants in order to free up space for other essential fiscal policies.
Proposals for Reform
To balance the country's budget, the IMF has offered a range of suggestions. These include:
1. Eliminating Non-Critical Positions: The IMF advocates for the identification and elimination of positions deemed non-essential as soon as they become vacant, which would gradually reduce the size of the public sector workforce.
2. Suspending or Reducing the Annual Cost-of-Living Adjustment (ATA): The report proposes either suspending the ATA for public employees or lowering its rate to less than 66% of inflation. It suggests that the time period between salary scales should also be extended to ease financial pressure.
3. Cutting Overtime: In a bid to reduce public spending, the IMF suggests scaling back on overtime work, which could help manage costs more effectively.
4. Abolishing the 13th Month Salary: Perhaps the most controversial recommendation, the IMF has called for the end of the 13th month salary, a benefit that has been a longstanding tradition in Cyprus. This suggestion, however, is likely to face significant social and political pushback due to its deep ties to public sector workers’ expectations.
Why Now?
The IMF's suggestions come at a time when Cyprus, like many other nations, is grappling with managing public sector spending while ensuring essential services are maintained. The public sector in Cyprus remains a cornerstone of the economy, but with rising costs and an aging population, the IMF argues that more sustainable fiscal policies must be put in place to avoid future economic challenges.
