Public finances

Silvan Mifsud is director of Advisory at EMCS Tax & Advisory. Mr Mifsud is also a council member of The Malta Chamber

A few days ago, some interesting data about Malta’s public finances until end May was published. Overall while total recurrent revenues increased by 15%, the total expenditure increased by 2% for the period January to May. This meant that for the period we still had a public deficit of €103m, which is however a substantial improvement as for the same period in 2022 we had a public deficit of €373m.

The largest increases in revenue were recorded under Income Tax (€179.5m), Grants (€56m), Social Security (€36.1m) and Value Added Tax (€28.1m).

Interesting to see, that during the period, the increase in recurrent expenditure were registered under Contributions to Government entities (€33.8m), Personal Emoluments (€22m), the Malta College of Arts, Science and Technology (€10.5m), Malta Tourism Authority (€7m), Resource Support and Services Ltd (€5.2m), Servizz.gov (€4.5m), Energy support measures (€66.1m), Social security benefits (€40.9m), Street lighting and other services (€9.8m), Tal-linja card (€9.4m), Temporary price stabilisation schemes (€8.2m) and Residential care in private homes (€7.5m). All the above increases were partially offset by lower outlays towards Pandemic assistance schemes (€107.5m), Economic stimulus payment (€48.2m) and EU own resources (€42.1m).

This means that had we had the hypothetical situation whereby government was not subsidising energy prices and other basic materials and free public transport, the public deficit for the period would have been much smaller, in the region of €20m.

Moreover, the government sustained its capital expenditure for the period, with the capital spending per the period amounting to €222.5m with €3.5m higher than 2022. This increase resulted from higher expenditure towards Property, plant and equipment (€10.2m), National Identity Management Systems (€4.8m), Digitalisation of health systems (€4.3m), Film industry incentives (€3m) and upgrading of existing storm-water systems (€2.9m), while on the other hand, expenditure towards Road construction and improvements fell by €22.1m.

At the end of May, Central Government debt stood at €9,083.6m, an increase of €673.8m when compared to 2022. The increase reported under Malta Government Stocks (€792.6m) was the main contributor to the rise in debt. It is also interesting to see the development which is holding the Malta Government Stocks. While in 2019 85% were held by local financial institutions and local households and 15% held internationally, by 2022 this changed with 78% by local financial institutions and local households and 22% held internationally. Within the EU Malta still has one of the lowest proportions of Malta Government Bonds held internationally, with only Germany and Sweden holding a lower proportion.