The Cyprus government intends to extend the current support measures for households amid ongoing price and energy risks. The Finance Minister plans to submit a proposal at the next meeting of the Council of Ministers to extend the fuel subsidy until the end of November 2026.
As government spokesman Konstantinos Letymbiotis said, the decision will take into account developments in energy prices on international markets. According to him, the authorities understand that the high cost of living remains a problem for Cypriot families. At the same time, a significant part of the inflationary pressure is linked to external factors originating outside Cyprus.
Since March 2023, the government has been implementing support measures in three main areas: directly reducing household expenses, increasing disposable income and addressing problems that require long-term changes. In total, the cost of measures implemented in these areas has already exceeded €1 billion.
Electricity and fuel: what measures are in place
One of the main priorities remains reducing electricity costs. The state continues to provide targeted electricity subsidies for vulnerable households and small businesses. In addition, the group of beneficiaries eligible for the special Tariff 08 of the Electricity Authority of Cyprus (EAC) has been expanded. VAT on electricity was reduced from 19% to 9%, and until March 2027 it is expected to stand at 5%. This measure applies to around 420,000 residential properties of household consumers.
In the fuel sector, the reduction in the special excise duty will also remain in place until the end of November. At the same time, the government decided not to introduce a “green” fuel tax. According to the authorities, this avoids an additional increase of around 9 cents per litre. The additional costs are being covered by the state budget. A zero VAT rate on a number of basic goods also remains in force, aimed at reducing the financial burden on families.
Tax reform and rising incomes
The government is also focusing on increasing households’ disposable income. Under the tax reform, more than 200,000 taxpayers are expected to see an increase in their net income already in 2026. Around 30,000 more residents will no longer fall into the taxable category thanks to a higher tax-free threshold. According to Letymbiotis, as a result, more than 6 out of 10 households will see an increase in disposable income.
Among other measures, he highlighted the planned pension reform, two increases in the minimum wage — from €940 in 2023 to €1,088 — an increase in child benefit, support for large families and housing policy with funding exceeding €150 million. Particular attention is also being paid to energy costs. The authorities are implementing subsidy programmes, or increasing subsidies, for the installation of photovoltaic systems and are promoting a support scheme for electricity storage.
Why inflation is rising in Cyprus
The government acknowledges that inflationary pressure in Cyprus remains real, but urges people to look not only at the headline figure but also at its composition. According to Letymbiotis, the 5.2% inflation rate should not be viewed in isolation. The main pressure is currently concentrated in two categories — services and energy. Together, these two sectors add around 5 percentage points to the overall inflation rate of 5.2%. At the same time, the contribution of food to inflation has declined from 0.78 to 0.65 percentage points.
Another factor is seasonality. From May to August, inflationary pressure in Cyprus is traditionally higher. This is partly due to the increase in tourist arrivals and, consequently, the temporary rise in the number of people staying on the island.
The government also points to the difference between the harmonised and national consumer price indices. In July 2026, the harmonised index stood at 4.4%, while the national consumer price index, which reflects the spending structure of Cypriot households specifically, was 2.9%.
At the same time, the authorities continue working on reducing Cyprus’s long-term energy dependence: a competitive electricity market is being developed, energy storage projects are being implemented, the electricity grid is being modernised and the country’s energy mix is changing. The government considers the use of natural gas to be one of the key long-term solutions.
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