Taxpayers will this year not see the promised drop in the top income tax rate as the government does not yet have the "fiscal flexibility" to honour its electoral pledge, according to the Finance Minister.

" We have to appreciate that since that pledge was made there have been significant changes in the world economy that have impacted government revenues," Tonio Fenech told The Sunday Times in an interview.

The pledge to reduce the top income tax rate to 25 per cent from 35 per cent for those who earn less than €60,000 was a major electoral plank for the Nationalist Party during the last general election campaign.

Mr Fenech said the government would have to consider implementing the pledge at some stage but insisted it was "too early to say when".

With the government aiming to take the deficit below the three per cent mark next year it would be difficult to adopt the tax cut that may lead to a loss of €40 million in revenue, he said.

"We would have to cover that by further cost cutting - which could in turn harm the economy," Mr Fenech said.

Mr Fenech also discusses the restructuring exercise at Air Malta and insists the government could consider privatising the ground handling operations if work practices do not change significantly.

However, he also added that changes to the airline's ground handling operations were not the be-all and-end-all of the restructuring as the airline was saddled with archaic work practices.

He said that at the current rate of losses the government would not be able to sustain Air Malta for long.

(Full interview in the Interview section)