The International Monetary Fund has published the package for its 2026 Article IV consultation with Cyprus, including the press release, staff report, informational annex and the statement by Cyprus’ executive director. The IMF concluded that Cyprus’ economy remains resilient despite higher energy prices and lower tourist arrivals, with strong growth and solid fundamentals, but said short-term risks are tilted to the downside and structural vulnerabilities remain. Executive Directors said Cyprus’ strong fiscal performance and lower public debt create room for gradual, growth-friendly fiscal easing, provided it is carefully calibrated to avoid overheating and preserve buffers against ageing-related, defence and infrastructure spending pressures. They called for higher spending and tax efficiency, prioritisation of high-quality public investment, discipline in public wage growth and temporary, targeted household support measures. On financial stability, they said banks remain sound, supported by strong capital, liquidity and better asset quality, but warned that sizeable real estate exposure and legacy nonperforming loans outside the banking sector require continued vigilance. They also highlighted the need to preserve an effective foreclosure framework, strengthen insolvency processes, improve judicial efficiency, enhance risk monitoring and advance anti-money laundering and countering the financing of terrorism supervision. The IMF also said sustained growth will depend on structural reforms to raise productivity and investment, including better skills matching, stronger human capital and artificial intelligence readiness, wider digital adoption, a more effective judiciary and faster energy sector reform. Timely implementation of measures under the European Union-funded Recovery and Resilience Facility was identified as another priority. Cyprus’ Ministry of Finance welcomed the IMF’s observations and recommendations and said it agreed on the need for more efficient, less distortive fiscal policy focused on growth-enhancing investment and longer-term economic challenges.

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