Dorita Yiannakou
Cyprus recorded an increase in state development spending during the first half of 2026, according to a report by the Treasury on the implementation of the state budget.
Total development expenditure reached €412.4 million, compared with €370.8 million during the same period in 2025, bringing the implementation rate to 25%, above the average of the past decade, which stood at 22%.
The figures show that the largest share of funds went towards infrastructure projects.
Capital expenditure reached €140.8 million, with major payments directed towards the road network (€29.4 million), construction projects (€25 million), government buildings (€17.5 million), equipment purchases (€14.4 million), and school buildings (€10.7 million).
Social benefits included in development spending amounted to €26.8 million, of which €20.1 million concerned education benefits, €4.2 million cultural benefits and €1.5 million housing support.
The first-half figures show that the government’s development strategy focused on three main areas: investment in public infrastructure, strengthening universities, and making greater use of co-funded programs, with the aim of boosting growth and supporting economic activity.
EU-funded programmes provide additional boost
Co-funded programs also played an important role, with spending reaching €105.7 million.
Major areas of expenditure included:
- €25.5 million through projects implemented by non-governmental services;
- €11.6 million for the scheme subsidising tuition fees and meals for children up to four years old;
- €11.3 million for the Industry and Technology Service Scheme;
- €9.3 million for projects co-funded by Home Affairs Funds;
- €5 million for European competitive programmes;
- €4.7 million for the “Save – Upgrade Homes” scheme;
- €4.6 million for the promotion of electric mobility;
- €4.6 million for sustainable urban mobility projects.
Universities receive major funding
A significant increase was also recorded in grants, contributions and subsidies, which reached €115.1 million, up from €89.2 million in the first half of 2025.
The largest part of this funding went towards:
- the University of Cyprus (€64.2 million);
- the Cyprus University of Technology (€34.4 million);
- the Open University of Cyprus (€5.5 million);
- the Cyprus Institute (€3.9 million);
- the Cyprus Institute of Neurology and Genetics (€2.6 million).
Higher revenues boost budget performance
State revenues during the first six months of 2026 reached €4.44 billion, representing 41% of the annual revenue budget.
Actual expenditure stood at €4.63 billion, corresponding to 40% implementation of the budget.
Revenues increased compared with the same period last year, mainly due to higher income from both indirect and direct taxes.
Indirect taxes rose by €170 million, while direct taxes increased by €90 million.
More specifically, indirect tax revenues increased by 8% compared with the first half of 2025, mainly due to higher VAT receipts, which rose by €200 million (€1.68 billion in 2026 compared with €1.48 billion in 2025).
Direct taxes increased by 6%, driven mainly by higher income tax receipts from legal entities and individuals, which increased by €100 million (€1.48 billion in 2026 compared with €1.38 billion in 2025).
Spending increases mainly on transfers and social support
The higher level of expenditure implementation was mainly linked to increased spending on transfers and subsidies, which rose by €110 million, operating expenses, which increased by €80 million, and social benefits, which grew by €50 million.
Inflows from borrowing and repayments of issued loans during the first half of 2026 amounted to €1.25 billion, compared with €30 million in the same period of 2025.
Meanwhile, outflows related to loan repayments and new loan issuance reached €2.09 billion, compared with €110 million last year.
The projected increase in state revenues is mainly linked to a €130 million rise in direct taxes and a €330 million increase in grants, while the increase in expenditure is largely attributed to a €360 million rise in operating costs.
Public sector salaries unchanged, social spending rises
Spending on salaries, pensions and gratuities remained at similar levels to last year, reaching €1.63 billion during the first half of 2026.
In contrast, social benefits increased by 5%, reaching €960 million compared with €910 million in the same period of 2025.
The increase was mainly attributed to higher spending on healthcare, education and housing support.
Transfers and subsidies also increased, reaching €960 million compared with €850 million last year, an increase of 12%.
Operating and other expenses rose to €430 million, from €350 million during the corresponding period in 2025.
The €80 million increase was mainly linked to higher spending on defense and policing, as well as increased operating costs, consultancy services, and research expenses.
