Our View: Government has no say over war-caused price hikes

Cyprus’ inflation rate is one of the lowest in eurozone. In February 2026, according to Eurostat, Cyprus posted an annual inflation rate of 0.9 per cent, significantly lower than the eurozone average which stood at 1.9 per cent. It is difficult to say how inflation is kept under check so effectively considering the government’s spending, the repeated increase of the minimum wage and its efforts to impose CoLA on as many businesses of the private sector as it could.

The inflation rate is low in spite of high government spending, but this seems set to change in the next few months. The world price of crude oil has been rising ever since the Israel-US attack on Iran and cannot leave Cyprus unaffected. The spot price of Brent crude oil was at $82.49 per barrel on Wednesday, up 13.11 per cent in the last week. The closure of the Strait of Hormuz will put additional pressure on energy prices while nobody has any idea how long the war will last. Its duration will also have an impact on energy prices.

Cyprus’ complete dependence on oil means the economy cannot be protected when the world price rises. There is an increase in petrol prices and electricity rates as the EAC’s power stations use mazut fuel. In short, there is a reduction in people’s disposable income, while businesses are faced with higher operating costs that are usually reflected in higher prices.

This is a reminder of the criminal negligence of successive governments, all of which failed to import LNG and reduce energy costs for households and businesses. Instead, the dependence on costly mazut for electricity production continues with the consumer being forced to pay more for electricity every year, because of increasing penalties for carbon emissions. This year, the increase in the penalty total that is put on electricity bills will be in the region of €100 million.

It is very difficult to control prices once they start rising because of exogenous factors. Finance Minister Makis Keravnos acknowledged on Wednesday on a radio show that rising prices are a possibility in the current conditions. He tried to say that the government had taken precautions, by ensuring there were surpluses, but healthy public finances will not prevent energy prices from rising and impacting all other prices.

Unfortunately, there is no magic formula to prevent inflationary pressures, especially when they come from abroad. Much will depend on the duration of the war, but our government has no say in these matters. We can only express the hope that it will be over soon and the world oil price will stop rising.