Rise in government debt, structural deficit

Government debt outstanding at the end of July stood at Lm1,049.5 million, up by Lm55.7 million, or 5.6 per cent, from Lm993.8 million outstanding at the end of July last year, the National Statistics Office said yesterday.

At the end of July, government debt was Lm36.8 million more than at the end of last year. Compared to one month earlier, government debt declined marginally by Lm0.1 million.

The structural deficit between ordinary revenue and total expenditure (less contribution to the sinking fund in respect of local and foreign loans as well as less direct repayment of loans) amounted to Lm72.5 million, up from a shortfall of Lm68 million for the same period last year.

Ordinary revenue during the first seven months of this year increased by Lm33.3 million, or 9.2 per cent and amounted to Lm393.6 million, when compared to the same period of last year. Ordinary revenue made up 53.5 per cent of this year's budget forecast.

The part-privatisation of the Malta International Airport yielded Lm21.0 million, in capital gains tax, duty on documents and dividends.

At the same time, total expenditure amounted to Lm472.1 million, an increase of Lm37.2 million, or 8.6 per cent, over the Lm339.2 million expended during the January to July period last year.

The increase in ordinary (or recurrent) revenue during the period under review was mainly due to an increase of Lm7.5 million collected under income tax and a higher income of Lm10.4 million recorded under the Licences, Taxes and Fines head of revenue, and was made up of receipts from oil rental fees and duty on documents, as well as receipts previously shown under the Lotteries head of revenue.

Other substantial increases include Lm10.5 million under dividends on investments, through the MIA plc shares transfer process and Lm5.8 million under Fees of Office, mainly through proceeds from the Foreign Investment Scheme registration tax.

An increase of Lm3.7 million was also recorded under Customs and Excise duties, mainly through excise revenues from machine-made cigarettes and petroleum. Consumption tax this year increased by Lm2.2 million, while revenue from social security contributions increased by Lm0.1 million or 0.1 per cent.

Recurrent expenditure, excluding public debt servicing, during the first half of the year amounted to Lm368.4 million, an increase of Lm29.2 million or 8.6 per cent over the Lm339.2 million expended last year. Total expenditure for the period under review makes up 56 per cent of this year's budgetary estimates, up from 55.2 per cent of the actual final outturn for last year.

Personal Emoluments to date amounted to Lm114.1 million and made up 57.8 per cent of the budget (Lm197.6 million).

Last year's outlay for this category amounted to Lm112.8 million. This also accounted for 57.8 per cent of the final outturn of Lm195.0 million.

As far as the operational and maintenance expenses for both periods are concerned, last year's outlay of Lm25.4 million accounted for 56 per cent of the final outturn, while this year's expenditure of Lm29.4 million accounts for 65.1 per cent of the budget figure.

This increase is due to (a) higher settlement of utility bills (Lm3.1 million this year against last year's Lm2.9 million), and (b) expenditure on the health division's medical and surgical materials (Lm10.1 million this year compared to Lm7.7 million during the same period last year).

The outlay in respect of Special Expenditure, at Lm0.28 million represented a decrease of Lm0.01 over the expenditure last year (Lm0.29 million).

The expenditure incurred on the Programmes and Initiatives category last year amounted to Lm180.2 million and stood at 56.1 per cent of the final outturn (Lm321.6). This year's outlay of Lm187.1 million represents 54.8 per cent of this year's budget estimates. The increase, in absolute terms, of Lm6.8 million this year mainly represents increases in social security benefits (+Lm4.1 million), and NPAA-related activities, mainly those undertaken by the Education Ministry. The latter element was last year implemented later on during the year.

The outlay on the Contributions to Government Entities category this year amounted to Lm37.5 million, an increase of Lm17 million over the Lm20.5 million expended last year. This increase includes more than Lm15 million which during 2001 were accounted under Capital Expenditure as operational and debt servicing costs of entities like Malta Drydocks, Freeport and MGI/MIMCOL, or withdrawn from the Treasury Clearance Fund instead of from the Consolidated Fund.

Furthermore, expenditure in respect of entities like the Malta Statistics Authority, and the Roads and Licensing and Testing Directorates, which this year is accounted under this category, was last year featuring as a normal Vote. Percentage-wise, the contributions to government entities last year accounted for 39.5 per cent of the final outturn (Lm52.04), compared to 51.8 per cent spent during the same period this year when compared to the budgeted figure (Lm72.41).

Last year, the reclassification of expenditure items of a recurrent nature from the Capital to Recurrent was effected en bloc at the end of the year.

The interest portion of public debt-servicing costs has this year increased by Lm3.2 million or 8.9 per cent, and amounted to Lm38.9 million. This increase was mainly the result of loans borrowed during 2001 and more resort to treasury bills this year than last year.

As far as the capital budget is concerned, this year's outlay has exceeded last year's by Lm5.4 million, an increase of 10.1 per cent and amounted to Lm58.7 million.

This comparative increase was due to higher contributions to the Malta Tourism Authority (+Lm1 million), expenditure related to sundry roads projects (Lm2 million), on the New Hospital Project (+Lm6 million), and the Shipyards early retirement schemes (Lm6 million). On the other hand, this year's capital expenditure excludes Lm15.8 million representing outlays in respect of entities, which last year featured under Capital Expenditure, and this year, are being reported under Recurrent Expenditure.

Treasury bills and Malta Government Stock accounted for Lm198.9 million or 19 per cent, and Lm813 million or 77.5 per cent respectively of government debt. The remaining share of Lm37.6 million or 3.6 per cent was made up of foreign borrowing.

The NSO also gave information on the government guaranteed debt. The amount of Lm396.9 million represents outstanding balances on government guaranteed debt. They exclude Multilateral Investment Guarantee Agency (MIGA) and International Bank for Reconstruction and Development (IBRD) positions, as well as government guarantees on foreign loans taken by the Central Bank on behalf of the government as these loans already feature in the calculation of government foreign debt.

The aggregate figure of Lm396.9 million is arrived at by adding the amount withdrawn (being an overdraft or loan), with the interest charged during the period under review. If the figure exceeds the limit, the latter is then reported as being the total balance guaranteed by the government. The data sources of the guaranteed debt are the Treasury, the Ministry of Finance and the Central Bank of Malta.