Credit rating agency Scope Ratings has significantly upgraded Cyprus's long-term sovereign credit rating, a move that reflects the island nation's robust economic performance and prudent fiscal management. This positive assessment, extending through to late 2025 and beyond, coincides with Cyprus's commitment to contribute to an EU-backed loan facility for Ukraine. Finance Minister Makis Keravnos described the upgrade as "another significant advancement."
The upgrade is supported by a confluence of favourable economic indicators, notably a dramatic reduction in public debt. This debt is projected to decrease from 113.6% of GDP in 2020 to an estimated 55.4% by 2025, with further decline anticipated to fall below 40% by 2030. Sustained budget surpluses, estimated at approximately 3.3% of GDP for 2025, are also contributing to this fiscal consolidation. Furthermore, the Cypriot banking sector has demonstrated considerable resilience, with non-performing loans significantly curtailed to 4.2% by October 2025.
These favourable economic conditions have strengthened Cyprus's internal financial architecture and positioned it for a more prominent role within the European Union's economic initiatives. As one of 24 member states participating in a substantial EU loan package for Ukraine, Cyprus is slated to contribute to the annual interest servicing. Its share for 2026 is estimated at €4.4 million, with the initial €2.2 million contribution to be drawn from existing budgetary headroom.
The EU loan to Ukraine will be raised through market mechanisms by the European Union itself. Repayment by Ukraine is contingent upon its ability to secure reparations from Russia, as affirmed by EU Council Conclusions from December 2025. Should Ukraine be unsuccessful, the financial burden would fall upon participating EU member states. Frozen Russian assets, estimated at approximately €210 billion, have been earmarked as a backstop for this loan facility.
The credit rating upgrade serves as a powerful testament to Cyprus's adept economic stewardship, enhancing its financial resilience on the international stage. Its strengthening banking sector bolsters lending and investment capacity, while robust public finances solidify its position as a fiscally sound nation within the EU. The commitment to the Ukraine loan, while modest for Cyprus, is largely mitigated by existing EU budgetary provisions. Nevertheless, the long-term implications for member states, should reparations not materialise, warrant careful consideration.