Finance Minister pledges continued fuel support but gives no commitment on €1,000 bonus

The government will continue subsidising fuel and electricity prices in next year’s budget, Finance Minister Clyde Caruana said on Wednesday, arguing that maintaining the measures is necessary to protect households and the Maltese economy from continued volatility in international energy prices.

Caruana however would not confirm whether the €1,000 super bonus promised to workers by the Labour Party during the election campaign will feature in the upcoming budget 2027, instead invoking biblical creation to urge patience.

Caruana stressed that a parliamentary mandate spans a five-year term and that “everything has its time.” While maintaining that the government fulfills its promises, he emphasised that current economic stewardship requires protecting public finances and shielding the nation from high energy costs.

When pressed about the bonus, he reiterated that budget preparations are underway but stated he would not compromise national economic safety for any single proposal.

Volatile diesel and energy costs

Speaking at the launch of the pre-budget document for 2027, Caruana said the government wanted to provide stability and give people “peace of mind” that the measures currently in place would continue.

Caruana told social partners that diesel and energy costs, which skyrocketed during the Hormuz crisis, are showing no signs of abating, painting a grim picture of the world’s energy supply.

Caruana said the decision to maintain the subsidies comes against a backdrop of continued volatility in European energy markets. EU consumer diesel prices increased over recent years, with prices in March 2026 exceeding the peak recorded during the 2022 energy crisis and remaining elevated thereafter.

Fuel prices also vary considerably across the European Union. Malta currently has the lowest consumer diesel price at €1.21 per litre, while the Netherlands has the highest at €2.58.

Caruana compared fuel prices in Malta with those in our nearest neighbour, Sicily. He explained that although this country is just a stone’s throw away from us, the price of diesel is almost double the price in Malta, while the price of petrol is 60% higher than in Malta.

European natural gas prices have also risen sharply since 2021, reaching a peak during the 2022 energy crisis. The average TTF price in 2025 was around three times the average recorded in 2019 and 2020, while prices have begun trending upwards again.

The ministry said energy security concerns were also linked to Europe’s gas-storage position. Storage levels were depleted following the colder 2025-26 winter, meaning the refill period began from a lower base than in recent years.

Electricity prices, meanwhile, rose sharply during the energy crisis. Although they stabilised somewhat between 2023 and 2025, they remained above pre-crisis levels.

Caruana cautioned that interconnector costs had doubled in March and were probably going to rise even more.

Removing subsidies would hit growth

Malta is on track to spend more on energy subsidies this year than it did during the height of the conflict in Ukraine, according to Caruana, who said the country faces a “economic catastrophe” if energy subsidies are eliminated.

Since Russia’s invasion of Ukraine caused market prices to rise, Malta has had steady energy prices because of government subsidies protecting customers from price increases.

“In just a few months, energy prices have risen very significantly. Yet, in our country, fuel, electricity, and gas prices have remained unchanged. No other country is doing what we are doing. Malta is the only country that has continued to shield families and businesses from these heavy burdens,” Caruana said.

He explained that although energy and food subsidies decreased from €242.5 million in 2023 to €188.1 million in 2025, they are projected to rise significantly to €391.7 million in 2026, driven by ongoing global geopolitical tensions.

For 2027, subsidies are estimated to reach approximately €400 million. Added to this is an investment of €75 million in energy infrastructure.

“Over the past five years, this government has spent no less than €1.35 billion on energy subsidies. We are doing all this because we acted prudently and our country’s finances are strong. If the country’s finances were not strong, we would not be in a position to provide all this assistance,” the Minister said.

The pre-budget document estimates that removing the subsidies would have a persistent contractionary effect on the Maltese economy. Without the subsidies, the Maltese economy would suffer long-term repercussions, while jobs in the country would decline and unemployment would rise.

According to the government’s assessment, real GDP would be €235.5 million below the baseline in 2026 if the subsidies were removed. The effect on the labour market would emerge more gradually but would remain negative throughout the projection period.

Higher consumer prices would also feed into the Cost of Living Adjustment. Without the subsidies, the estimated COLA payment for 2027 would rise to €18.05, reflecting the impact of higher prices following their removal.

“The people should have peace of mind that that which we are doing, we will keep on doing,” Caruana said in reference to the subsidies.

“This is the time to protect our economy,” he said, adding that the budget would “guarantee a better future.”

He stated that although these are challenging times, the government will continue to offer stability in this sector to protect Maltese and Gozitan consumers while simultaneously maintaining economic stability.

Deficit falls below 3%

The Minister also highlighted Malta’s improving fiscal position.

The general government deficit fell from 3.4% of GDP in 2024 to 2.2% in 2025. The government said this performance allowed Malta to correct its excessive deficit two years earlier than had originally been committed.

Malta’s debt-to-GDP ratio is projected to remain below the 60% threshold and significantly below the EU and euro-area averages. Five EU member states continue to record debt-to-GDP ratios above 100%.

In absolute terms, however, general government debt increased from €5.7 billion at the end of 2019 to €11.4 billion at the end of 2025. The government attributed much of the increase to the financing of two successive and exceptional external shocks.

The pre-budget document also points to continued strength in the labour market. Malta recorded the highest employment rate in the EU, while the overall participation rate increased from 81.8% in 2024 to 82.6% in 2025, compared to the European Union average of 75.6%.

The country also boasts the highest employment rate in the EU, at 84.0% in the second quarter of 2026, compared to the European average of 76.4%.

Furthermore, in July 2026, Malta recorded one of the lowest unemployment rates in the EU, well below both the EU and euro-area averages.

Inflation in Malta remained moderate over the past twelve months, with a rate of 2.1% recorded in July 2026-well below the European Union average of 3% and the Eurozone average of 2.9%.

Malta’s economic growth also outpaced the EU and euro area in 2025, with the country’s real economic growth exceeding the 1.4% recorded in the EU and 1.2% in the euro area.

Fiscal sustainability will remain a key priority in the coming years, Caruana said. In recent years, Malta’s deficit narrowed from 3.4% in 2024 to 2.2% in 2025; for 2026, it is projected to stand at 2.8% of GDP, remaining below the 3% threshold set by the European Commission.

Caruana said the upcoming budget would focus on stability, with the government opting to maintain measures aimed at shielding consumers and businesses from international energy-price pressures.

The pre-budget document is available on the Ministry for Finance website: finanzi.gov.mt.