Deficit down, debt surpasses €4 billion

Spurred by a growing economy, the government’s deficit in the June quarter dropped by €7 million when compared to the same period last year.

Figures released by the National Statistics Office show government revenue stood at €593 million in the second quarter with higher yields from tax income.

The main contributors to the increase were social security contributions (€20 million), capital transfers (€19 million) and income from property (€5 million). Income tax also yielded more than €4 million in the second quarter over the amount registered in the same period last year.

Expenditure in the June quarter amounted to €668 million, an increase of €16 million when compared to the previous year. Social benefits were up by €10 million and wages in the public sector shot up by €9 million.

The NSO said long-term loans in the public sector increased by €15 million, mainly triggered by the loan facility to Greece as part of the pan-European rescue package agreed to earlier this year.

Debt did not mimic the deficit’s decline, increasing instead by €291 million. By June, government debt stood at a whopping €4.2 billion.

The NSO yesterday also published the results of its second reporting exercise for the year, benchmarking government’s finance data in 2009 with the Maastricht criteria.

At the end of last year, public finances registered a 3.8 per cent deficit, down from the previous year’s 4.8 per cent. The Maastricht criteria stipulate a deficit level of less than three per cent.

According to Eurostat figures out yesterday, Malta was one of only two EU member states that managed to reduce their structural deficits in 2009, the other being Estonia.

The debt level in 2009 reached 68.6 per cent of GDP, well above the EU benchmark of 60 per cent. Asked to explain this significant increase, a spokesman for the Ministry of Finance pointed to a number of factors including the loss of almost €40 million in revenue from taxes, primarily due to the global recession, and almost €130 million in extra expenditure not foreseen in the Budget for last year.

Among the biggest expenses was €57 million in connection with the closing of Malta Shipyards, a rise of €11 million in the cost of medicines, a €7.6 million outlay on vaccines for the swine flu pandemic, another €7 million for the University and an additional €5 million in costs related to illegal immigrants.