Finance Minister Harris Georgiades says the cost savings were achieved mainly by limiting ministry spending.
The 5.6 billion-euro ($7.58 billion) budget projects a primary deficit of 3.4 percent of gross domestic product next year, lower than the target of 4.25 percent.
Georgiades said after the Cabinet approved the draft budget Thursday that more cuts to the public sector wage bill and social spending will be made.
Cyprus' eurozone partners and the International Monetary Fund loaned it 10 billion ($13.5 billion) this year in a rescue deal that saw uninsured depositors take huge losses on savings in the two biggest banks.
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