I am writing this article before Budget 2026 has been presented. So please allow me to express what I believe such budget should be focused on should it be guided by pure solid economic strategy rather than political expedience. The Prime Minister has already enthusiastically dubbed it the “best budget ever”, setting a populist tone before a single measure is made public. While such pronouncements may win headlines and temporary favour, they shift focus to a fundamental economic reality. Malta is at a critical juncture where responsible, long-term fiscal planning must decisively replace the politics of short-term electoral gain, in line with Malta Vision 2050.
It would be wise for policymakers to heed the common advice coming from the Malta Fiscal Advisory Council, the IMF, various international credit agencies (such as DBRS Morningstar), and the EU Commission, which have all had a clear, unified message: Malta must urgently heed the call to rein in public spending and create significant fiscal buffers. While increased public spending is politically expedient, it is slowing down the necessary fiscal consolidation. International credit agencies, while maintaining a high rating, have been explicit in their warnings that this slow pace of deficit reduction – driven by sustained, recurrent expenditure – risks undermining the country’s long-term fiscal trajectory. Simply put, we are spending today’s windfalls without sufficient regard for tomorrow’s inevitable headwinds.
Beyond reigning in the overall public expenditure, Budget 2026 would best indicate clearly how public expenditure is to be decisively redirected from propping up consumption to transforming our economy at a much more accelerated pace. Future prosperity depends on a shift away from a model dependent on high volumes of low-value labour and towards one driven by quality. Fiscal spending must, therefore, be channelled into investments that achieve higher productivity levels, generate more value-added based on significant research and innovation (R&I), and ensure a much wider and deeper use of digital solutions. This means moving beyond generic incentives and committing to a coherent, well-funded strategy for the national R&I infrastructure and the widespread upskilling of our workforce. A truly responsible budget is one that sacrifices a small, immediate consumption boost for a lasting increase in the nation’s productive capacity.
It is expected that Budget 2026 will include increased benefits aimed at addressing Malta’s low fertility rate – a noble societal goal. However, all available research studies from developed nations and even locally-based research, overwhelmingly show that increased fiscal benefits alone are not enough to really bring about a change in a country’s fertility trends. The decision to have children is complex, driven not just by an increase in any allowance, but by deeper, holistic factors. A genuine shift requires a comprehensive, holistic approach that addresses multiple factors such as accessible, affordable, and high-quality childcare over extended timeframes, longer school hours, better-coordinated after-school activities and more affordable housing, among other key areas requiring attention. Throwing cash at the problem is a populist gesture that provides negligible results on the intended outcome.
Another area where populism has caused significant paralysis is the massive traffic problem. We have now arrived at a point where tiptoeing around this issue, focusing only on positive incentive solutions like road-building and free public transport, is causing a huge economic cost in lost productivity, fuel waste and stressed citizens. We need to find the courage to disincentivise private car use if we are to seriously start tackling this problem. A budget that ignores the need for brave, unpopular decisions on traffic is an economic disservice to the country.
Ultimately, a budget built on satisfying every competing interest is a budget designed to fail in its primary duty to the common good. This dangerous balancing act is perfectly encapsulated by the very recent survey results published by the Chamber of SMEs. The survey clearly shows that businesses and people want, on one hand, to have more foreign workers to address acute labour shortages, but then also grumble about overpopulation and its strain on infrastructure. This contradictory desire – to want the economic benefits of population growth without the associated social and infrastructural costs – is the core problem of a policy based on populism. It attempts to square a circle instead of making the hard choices that a sustainable, high-quality economy requires.
Budget 2026 is yet another opportunity for this nation to step away from the allure of the “best budget ever” rhetoric and present a plan that prioritises long-term national resilience over short-term electoral gratification. Do we have the courage to grab this opportunity and do what it takes?
