The budget presented last Monday by the minister of finance has been analysed extensively in the media with more analysis yet to come. We await the answer of the leader of the Opposition to the budget in parliament and the reply of the prime minister. Then the estimates of each ministry are discussed and, presumably, there will be yet another critique of the government's performance and the impact of this year's budget on each ministry.
The reactions have been varied, ranging from the very positive to the very negative, as can be expected in a democratic society.
I believe this is a 'sober' budget that reflects fully the state of the economy today and the parameters of public finance within which the government has to operate. There is no sense of over-confidence in the budget, but it reflects a sense of satisfaction the government feels that the country is managing to weather the storm and to overcome the challenges that the international economic slowdown and the events of September 11, 2001, have brought about.
As an aside, it is worth pointing out the havoc these have brought to the public finances of strong economies such as those of the United Kingdom, Germany and France.
This did not happen in Malta. The budget deficit as a percentage of the gross domestic product was targeted to be 4.6 per cent this time last year and this figure is expected to be maintained.
The budget also presented comparative data on various aspects of the economy and how these have developed over the last four years.Things that strike one's attention is the growth in employment, the growth in national income, the growth in savings, the growth in the country's foreign reserves.
Up to a certain extent this was a budget that prepared the way for the general elections of next year.
On the other hand, it was not an election budget where the government lost all sense of fiscal probity in an effort to win votes, but a budget that focused on specific segments of the economy with a view to stimulating them and on certain sectors of society in general with a view to helping those in greater need.
Some of these measures were the incentives given to small enterprises such as the tax exemptions on reinvested profits, the simplification of taxation on farmers, the adjustments made to the income tax bands, the cost of living index for the elderly, the continued removal of foreign exchange controls, the increase in social benefits.
None of these measures were extraordinary when considered on their own (which is what makes the budget a 'sober' one), but will be of direct benefit to targeted groups that are not small in number.
One of the things that struck me in the assessments that have been made about this budget is the comment made by some that the government presented no new ideas on how to stimulate further the economy, or how to attract more tourists, or how to generate more investment.
This government had managed to remove the aura that used to surround the presentation of the budget in the '70s and the '80s. The minister of finance was no longer transformed into a latter day Father Christmas with all of us waiting to see what goodies or freebies he was going to distribute.
This has been even more accentuated over the years by the fact certain decisions are taken outside the sphere of the budget. The cost of living increase is known well before the budget because the mechanism by which this is computed is known to all.
This year, the government concluded the collective agreement for its employees with the trade unions before the presentation of the budget. However, this year we had those that expected to find magic solutions in the budget ignoring totally the fact that the Malta Tourism Authority already has a strategic plan that it is implementing with the objective of improving tourism arrivals; or that we already have law in place that gives incentives for investment in the manufacturing sector.
The budget does not replace the work that is being done by the various ministries and government entities whose aim is to promote economic activity in the country, each with its own specific sector role.
The aim of the budget is only to provide a framework through the fiscal policies it implements, within which economic activity can develop. In effect this is why this year's budget was a 'sober' budget; because it sought to do just this. There was no effort to provide quick-fix solutions through an artificial injection of money into the economy.
This was a budget that reflected the great challenges that this country had to face over the last years, with the extensive restructuring that took place and the challenges that lie ahead, more so given the increased openness of our economy.
It is worth reminding ourselves the shedding of employment through natural wastage that has occurred in the public sector and the schemes that were put into place to achieve viability in entities like Malta Drydocks. These initiatives did not create jobs but addressed boldly certain structural problems in our economy that had accumulated over the years.
The challenges that our economy has to face can best be exemplified that next year the growth rate in real terms is expected to be only marginally higher than that of this year, while the public sector deficit is expected to be slightly lower than this year's.
Within this scenario, government took a very realistic approach and presented us with a 'sober' budget. This is just what the country really needed.