Deficit balloons as government sticks to its projections
Government spent more on interest on loans
to service debtThe government's budget deficit in the first seven months of this year is a staggering 36 per cent higher than the deficit for the same period last year, growing from €209 million to around €283 million, figures released by the National Statistics Office (NSO) yesterday reveal.
The troubling statistic comes in the wake of a declaration made earlier this month by Finance Minister Tonio Fenech, that the government's financial position was "slightly off target". However, the data released yesterday suggest it may not be so easy to brush aside the difference.
The Prime Minister (who was then also Minister for Finance) set out in his budget speech last November to end 2008 with a deficit of some €68 million. On this basis, Lawrence Gonzi had announced the government was aiming at achieving a budget surplus by 2010.
Asked how the NSO figures compared with the government's half-yearly projections, the Finance Ministry would not give a figure. "To be able to comment about the whole picture, we must wait until the end of the year to have annual figures..." a spokes-man for the ministry said, adding that the government is sticking to its projections.
In the remaining five months the government usually rakes in more revenue than it does until end July on a month-by-month basis.
Despite registering a deficit of around €208 million by July 2007, that year in fact ended with a deficit of just under €115 million, roughly as targeted.
Still, the gap to be bridged this year is substantially greater, almost double: €171 million between last month and the end of the year as opposed to €93 million for the same span last year.
The NSO said that an increase of €131.1 million in total expenditure was only partly offset by an increase of €56.5 million in recurrent revenue.
The widening deficit means the government spent more on interest on loans taken out to service the debt. About €106 million were borrowed during the period under review, pushing public debt servicing costs up to €108 million - a comparative increase of €4.7 million over 2007.
The Consolidated Fund recorded an increase of €26.7 million from income tax and of €24.4 million from VAT while social security contributions also increased by €15.1 million, but revenue from licences, taxes and fines is down by €7.3 million.
Overall, recurrent expenditure stood at €1,204.2 million, an increase of €129.1 million compared to the same period last year. Major increases in recurrent expenditure were recorded under social security benefits, which added €35.1 million, along with surges in the budget spend of the health and the IT ministries, which went up by €29.9 million and €12.3 million respectively.
The total government debt outstanding at the end of July amounted to €3,486.9 million, an increase of €159.6 million compared to the gross Central Government debt outstanding at the end of July last year. While long-term borrowing increased by €149.3 million, short-term borrowing and foreign borrowing declined by €11.2 million and €6.3 million respectively.