Further growth in structural deficit

A rise in government revenue of 6.9 per cent between January and October failed to make up for an increase in government expenditure of 7.3 per cent, resulting in another increase in the structural deficit, the National Statistics Office said.

The deficit was of Lm91.9 million, up by Lm9.2 million from Lm82.7 million in the same period last year.

The NSO yesterday issued the figures for government finances which gave the structural deficit between recurrent revenue and total expenditure during the period, less contribution to the sinking fund, in respect of local and foreign loans, and direct repayment of loans.

Provisional statistics supplied by the Central Bank of Malta report that government debt outstanding at the end of October stood at Lm1,035.3 million, Lm7.4 million less than a month earlier. It was, however, up by Lm13.9 million, or 1.4 per cent, from Lm1,021.4 million outstanding at the end of October last year.

Compared to the January-October period last year, recurrent revenue this year increased by 6.9 per cent and amounted to Lm562.8 million.

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

At the same time, total expenditure amounted to Lm661.2 million, an increase of 7.3 per cent over the Lm616.4 million expended in the same period last year.

The increase in recurrent revenue during 2002 was mainly due to an increase of Lm12.5 million collected from income tax.

An increase of Lm11.9 million was also recorded under the Licences, Taxes and Fines head of revenue, due to receipts from oil rental fees and duty on documents, as well as receipts previously shown under the lotteries head of revenue. A further increase of Lm10.6 million was recorded under dividends on investments, mainly due to the part-privatisation process of MIA.

Revenue under the Fees of Office head of revenue added Lm6.2 million, mainly through proceeds from the Foreign Investment Scheme registration tax.

Customs and Excise duties increased by Lm2.1 million, mainly through excise revenues from machine-made cigarettes and petroleum. Consumption tax increased by Lm1.9 million, while revenue from social security contributions increased by Lm1.0 million.

When compared to the same period last year, recurrent expenditure, excluding Public Debt Servicing, amounted to Lm524 million, up from Lm485.5 million expended last year, an increase of 7.9 per cent.

Personal Emoluments to date amounted to Lm163 million, while last year's outlay for this category amounted to Lm161.7 million.

The Operational and Maintenance Expenditure category increased its outlay by 8.3 per cent, and amounted to Lm38.6 million, up from last year's figure of Lm35.7 million. This year, there were more settlements of bills related to the Materials and Supplies item of expenditure (Lm17.6 million against last year's Lm15 million) mainly on account of the Health Division's medical and surgical expenditure.

The Special Expenditure category stood at Lm0.4 million representing a decline of 12.6 per cent over the expenditure effected last year (Lm0.5 million).

The expenditure incurred on the Programmes and Initiatives category outlay was of Lm269.1 million compared to last year's amount of Lm258 million.

The increase, in absolute terms, of Lm11.2 million this year is mainly due to increases in social security benefits (+Lm5.8 million), Treasury Pensions (+Lm1 million) and NPAA-related initiatives, mainly those undertaken by the Customs Department and the Ministry of Education. The latter element was last year implemented later on during the year.

The outlay on the Contributions to Government Entities category this year increased by Lm23.2 million, or 78.1 per cent and amounted to Lm52.8 million. This increase includes Lm22.5 million which during 2001 were accounted for under Capital Expenditure as operational and debt servicing costs (of entities like Malta Drydocks, Malta Freeport Corporation 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 in the form of a normal vote.

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

The interest portion of public debt-servicing costs this year increased by 9.4 per cent, from Lm49.6 million last year to Lm54.2 million. This increase was mainly the result of loans borrowed during 2001 and more resort to Treasury Bills this year than last year.

Capital expenditure during the period under review increased by Lm2.3 million, or 3.1 per cent and amounted to Lm76.5 million.

This increase was due to higher expenditure related to sundry roads projects (+Lm3 million), on the new hospital project (+Lm5.7 million), and the shipyards' voluntary retirement schemes (Lm6.4 million). As already indicated, this year capital expenditure excludes Lm22.5 million representing outlays in respect of entities, which are being reported under Recurrent Expenditure.

Treasury Bills and Malta Government stock accounted for Lm186.4 million or 18 per cent, and Lm813.0 million or 78.5 per cent of the government debt respectively. The remaining share of Lm35.8 million or 3.5 per cent was made up of foreign borrowing.

The Labour spokesman for the economy, Mr Leo Brincat, said that if one were to deduct the income from the sale of the MIA shares, and the loans for the Foundation for Tomorrow's Schools, the deficit would go up to Lm128 million, 65 per cent higher by the end of October than it was supposed to be by the end of the year.

In a statement, he said that this adjusted deficit would represent 7.5 per cent of the Gross Domestic Product.

He explained that the government had failed to reach its revenue targets and had only brought it to 60 per cent of the budgeted forecast.