Nicosia, Cyprus. The government plans to begin repaying about €12 billion borrowed over decades from the Social Insurance Fund starting next year, labour minister Marinos Mousiouttas said on Thursday.
Repayment plan and timeline
Mousiouttas said an actuarial study found that over a 40-year period from 2026 to 2066, the state will be able to fully repay its accumulated €12 billion debt to the Social Insurance Fund. The debt is set to be repaid gradually through annual instalments.
Annual instalments linked to GDP
The annual instalment could be three-thousandths of GDP, Mousiouttas said. Nominal GDP this year is projected at about €36 billion, making three-thousandths roughly €108 million. He said that at current levels this translates into about €100 million to €120 million.
Special-purpose vehicle and funding sources
Mousiouttas said a special-purpose vehicle, akin to a sovereign wealth fund, would be set up for the Social Insurance Fund by the end of 2027. The government would pay into this vehicle both the fund’s surpluses and the yearly instalments of its debt, with the amounts going directly into the Social Insurance Fund’s account.
Ending borrowing from the fund
Mousiouttas said the approach would gradually reduce the state’s debt to the Social Insurance Fund and that no further borrowing would take place. He said the government intends to end the practice of borrowing from the fund, which he said has been in place since 1960.
How do you think linking annual repayments to GDP will affect the pace of reducing the state’s debt to the Social Insurance Fund?