Finance Minister Clyde Caruana said in Parliament that all actions in regard to the future of the country’s finances shall revolve around one single goal: to uphold and promote Malta’s financial credibility.
Speaking on what the fiscal future holds for the Maltese islands, Caruana said that it is vital that the government remains “prudent and wise in its actions” as these are the two pillars that uphold credibility in this sense.
“This government is doing a lot, it shall continue to work a lot in this regard, but we must see that everything that we do continues to uphold our credibility,” Caruana said, “if we have nothing, that is the only characteristic that will help us move forward.”
He shared that through its decision-making in this sector – even amidst internal and external pressures – the government has managed to retain its credibility amongst the electorate and amongst the European Union’s institutions.
Caruana shared that in spite of the country experiencing shocks caused by the COVID-19 pandemic and Russia’s war on Ukraine, Malta’s debt-to-GDP ratio sits at around 50.1%. The Finance Minister added that this has improved significantly from the 73% proportion that the Labour government inherited after three consecutive PN administrations.
Additionally, he remarked how this credibility has benefitted the Maltese islands on the European political scene.
While speaking about Air Malta and KM Malta Airlines, Minister Caruana said that Cyprus once had its own national airline, though this was shut down by the European Commission and a replacement airline never followed. In contrast, he described that Malta was allowed to rebrand its national airline and start afresh because “the European Commission saw credibility” in the country’s presented fiscal plans and in the ambition for a Maltese national airline to be operated in a commercial manner.
However, he ascertained that KM Malta Airlines will only succeed if it continues to attract its two million passengers while working to make it a profit-maker, rather than a loss-maker as Air Malta infamously was.
Caruana commented on Malta’s excessive deficit procedures. He declared that in 2025, the country’s budget deficit should reduce to 3.5%, which is an improvement from the predicted 4% and initial 4.5% projections. The minister stated that he has “no worries” about the country’s finances manoeuvring through these procedures’ targets as EU rules “allow enough flexibility for us.”
The Finance Minister also dismissed the Opposition’s concerns over the country’s all-time high public debt, even though this figure exceeded €10 billion for the first time in Maltese history this September. He stated that this debt was used for a variety of positive reasons, including supporting businesses to continue operating during periods of financial downturn and safeguarding people from the increasing cost of living.
“There is nothing wrong in the fact that debt has increased,” he said.
He also declared that the fiscal plans offered through Budget 2025 not only ensure that Malta remains resilient in the face of future external shocks, but that they simultaneously continue supporting the Maltese and Gozitan people. As examples, he referenced the tax bracket revisions, the €250 increase to children’s allowances, and that this government has opted to continue providing energy subsidies on top of €50 million in COLA payments.
Caruana said that despite the European Commission recommending that Malta cuts its energy subsidies, the government opted to retain them for the following year to the benefit of the people. He detailed that the Commission accepted this decision as a result of the credibility shown through the presented fiscal plans, since these plans indicated that Malta would continue to be able to respect existing rules and reaching certain targets, “in spite of the Commission’s recommendation.”
Affirming the governmental decision to include mighty tax cuts in Budget 2025, Caruana noted that other European countries like the United Kingdom and France are going through serious struggles by moving towards different directions.
PN calls for COLA not to be taxed
Representatives of the Nationalist Party spoke before the Minister’s intervention and used their time to lay into the government’s fiscal decisions and the country’s direction as indicated through Budget 2025.
Headed by its own Shadow Minister for Finance, Graham Bencini, the PN diminished the effect of the introduced tax revisions, called for COLA to no longer be taxed, repeated its demand for the country’s economic model to change, and argued that amidst the country’s improving economic growth, the Maltese and Gozitan people are not reaping financial gain.
Bencini quoted statistics and said that 90,000 people across Malta and Gozo are living on less than €900 monthly, that around 20,000 children across the islands are currently living in poverty, and that the Valletta Soup Kitchen served over 120,000 meals just last year. Meanwhile, the inequality between society’s highest and lowest earners is growing, he added.
The Nationalist Party MP called for fiscal governance to be carried out not just onto the Maltese and Gozitan people, but also across the very people in government. He stated that the people are “tired of hearing about scandals related to money laundering” and reading about project budgets being exceeded, e.g., Ta’ Qali National Park going €60 million over budget, or the Olympic-level Gozo pool project going €7 million over budget.
He also cited the recent Amanda Muscat scandal and her alleged €50,000 kickback received for a contract with the Malta Tourism Authority, stating that the incumbent administration is only promoting strict fiscal governance on the people, while not holding itself accountable.
The party’s spokesperson said that the continued taxation of COLA payments is resulting in people losing between €70 and €100 annually, thus diminishing the purpose of the COLA mechanism to begin with.
He also said that it was an “absolute lie” that he and the Nationalist Party do not believe in tax cuts.
On the topic of public debt, Bencini declared that “the government’s recurring expenditure is not sustainable” and that this is evident by the fact that this expenditure is set to increase by €260 million just next year.
On behalf of the PN, Bencini condemned the measure introduced this Budget that all persons born in 1976 and afterwards must pay 42 years’ worth of social security contributions in order to be entitled to a full pension.
Here, he declared that if elected to power, the PN will eliminate this additional year, so that the future elderly will not need to worry about potentially forking out an extra year’s worth of contributions later down the line.
He also reiterated the call to change the country’s economic model, arguing that the Maltese islands requires a model that does not hinder people’s quality of life or the country’s competitiveness vis-à-vis foreign investment.
Bencini ended his discourse by telling Parliament that the country “needs a PN government” and that the party is “ready to offer a country of quality.”