Nicosia, Cyprus. The government will halt borrowing from the Social Insurance Fund (SIF) and begin repaying an estimated €12 billion debt, Labour Minister Marinos Mousiouttas said on Tuesday.
End of internal borrowing
Speaking to stakeholders and trade unionists at a conference of the labour advisory body, Mousiouttas called the change a “structural shift in how the state manages pension-related finances,” aimed at safeguarding long-term sustainability while limiting pressure on public debt.
“The first thing that has been achieved is that borrowing is being terminated,” he said, adding that the government is now working to determine “the formula by which this money will gradually come back to the SIF,” including the repayment timeframe.
Impact on public debt calculations
The SIF, which underpins Cyprus’ first pillar pension system, has historically been used by the state as a source of internal borrowing. Mousiouttas said ending the practice requires careful fiscal handling.
He noted that if alternative borrowing becomes necessary, it could affect headline public debt figures, as previous internal borrowing from the fund had not been included in those calculations.
Handling surpluses and repayments
Under the revised framework, annual surpluses generated by the fund will no longer be absorbed into general government financing.
Mousiouttas said responsibility for managing the fund’s surpluses will shift away from the finance ministry, adding that both future surpluses and repayment instalments would be channelled directly into a dedicated SIF account.
Debt level, projections, and investments
The minister said the current debt stands at €12 billion, while projected surpluses over a 50-year horizon could reach between €50 billion and €60 billion.
He described the fund’s investment profile as conservative, with about 95 per cent held in government bonds and the remainder deposited in domestic banks.
What impact do you expect ending borrowing from the Social Insurance Fund to have on public debt figures?
