Cyprus government extends electricity and fuel subsidies to combat inflation

In early September 2026, the Cypriot government announced the extension of fuel tax subsidies and electricity support measures until the end of November. Government spokesperson Konstantinos Letymbiotis confirmed that these measures aim to alleviate household costs amid rising inflation. Specifically, the government is maintaining reduced VAT rates on electricity—currently 9%, with a further reduction to 5% planned until March 2027—and continuing the zero-VAT policy on essential goods. Additionally, the government has suspended the imposition of a green tax on fuel to further ease the financial burden on consumers and small businesses.

Despite these government interventions, concerns remain regarding the effectiveness of the energy market. Experts and critics point out that the Competitive Electricity Market has not yet delivered lower costs for consumers, citing a persistent reliance on expensive imported fuels and conventional power plants. Wholesale electricity prices reached 273 euros/MWh in early September, reflecting the high costs still impacting the economy. Furthermore, observers highlight that significant investment in renewable energy sources has been hampered by inadequate grid planning and a lack of energy storage infrastructure. The Power Energy Cyprus (PEC) project, a 210-million-euro investment with 260 MW capacity, is expected to improve supply, but stakeholders stress that a long-term strategic approach is essential to ensure these potential savings reach the end consumer.