IMF Bill is approved

Finance Minister Tonio Fenech yesterday assured Parliament that the International Monetary Fund (Amendment) Bill, was moved on the recommendation of the Central Bank and the Attorney General had ensured that the procedure followed was similar to the 1973 Act on membership to international financial organisations and had the same wording as found in the Act on the European Bank for Reconstruction and Development.

There is a self-inflicted inflation due to high utility bills which does not attract foreign visitors to Malta

Winding up the second reading of the Bill, Mr Fenech was replying directly to a request raised earlier in the debate by Labour MP Alfred Sant, who called on the government to present Parliament with legal advice on whether the procedures followed on the Bill, on the approval of loans to Greece and Malta’s participation in the European Financial Stability Fund (EFSF), were in conformity with the Ratification of Treaties Act.

Mr Fenech said that changes in the articles of association in institutions like the IMF required only 35 per cent approval from member states. He agreed with the analysis made by the opposition on the global financial crisis where they said that the global economy had been built on debt.

The minister categorically denied that the government had in any way tried to influence the IMF and the European Commission on their Malta reports. The government respected such reports which had both praise and criticism. The government was not concerned with criticism on banks’ exposure to debts for construction purposes because the amount of people who defaulted on their home loans was very low.

He said that the debt of public authorities and corporations was published in their annual reports and could not therefore be taken in consideration again in the Budget. He said that although international institutions gave different rates for economic growth in Malta, they all had forecast that this would increase by at least two per cent. This was encouraging to the government when one considered the international crisis.

He referred to criticism made by CEOs of main companies in Malta, saying they were not always fair in their criticism to the government. They had been given necessary support during the international crisis. Foreign investment was being attracted with a gaming company providing another 100 jobs in IT.

Minister Fenech expressed satisfaction on the outcome of the vote by GWU members in Air Malta adding that the final report would be submitted to the European Commission when changes on restructuring and work practices were made. The report would include increasing the company’s capital to enable it to meet present and future challenges.

He said that during the last seven years there was an increase of 11,000 jobs.

Earlier, Dr Sant said the House was being undermined on this matter which was of great concern because Malta made financial commitments. It was important that Parliament carried out its own scrutiny, the more so at a time when there was a lot of turmoil in financial markets where the IMF was a key player and pressure was increasing on changes to the structure within the IMF itself.

He called on the government to analyse the latest IMF report on Malta where data relating to financial services and internet gaming were blurred. This data was also blurred in the Economic Survey and in the European Commission’s report on Malta.

The IMF report submitted two years ago had mentioned that the financial services and internet gaming sectors contributed to four and nine per cent of the economy respectively. The latest IMF report also remarked on the black economy.

The IMF was a key player in adopting this policy. The problems arising from this failure to control markets were contagious and Europe was also hit where precarious work was on the increase with workers earning less income. He referred to the Vatican’s statements on the need of fair play.

Dr Sant said there was the need to reflect on such a situation before taking decisions and advocated greater transparency and a focused discussion on today’s realities.

Mr Karmenu Vella (PL) said the IMF report for 2011 stated that Maltese economic growth for 2012 would be at two per cent. The report also made reference to various other sectors of Maltese economy such as competition, education and skills and inflation. The IMF report had stated that strengthening of the already existing infrastructure was needed for short term economic growth.

Mr Vella said that Malta had one of the lowest rates of graduates in Europe and thus output did not match the input. Participation rate of women and people between 55 and 64 years of age was one of the lowest in Europe, he said. It made no sense to encourage people to enter the world of work when no work opportunities existed.

Labour utilisation in Malta was not reducing the income gap of Maltese workers when compared with their European counterparts, according to IMF report. The income gap also existed internally between various local sectors. The IMF report also stated that Malta should try holding on to highly-qualified persons and should further enhance its education system.

Mr Vella said there was a self-inflicted inflation due to high utility bills which did not attract foreign investors to Malta. According to the report there was also a high risk of contagion if the crisis in the eurozone worsened. He said the government was not concerned despite the warnings he was receiving from various entities.

Air Malta was not tackled properly. A restructuring plan had to be carried out but, as stated by government, it was not ready and could not be approved earlier. In the Budget, the minister allotted a further €20 million to Air Malta over and above the €52 million loan earlier this year. Were these €20 million due because of the delay on the restructuring plan, he asked.

Charles Mangion (PL) said that the IMF was concerned with Malta’s increase in public debt and guarantees, which together amounted to €5.5 billion. How was this debt going to the addressed especially when it was increasing every year?

Between 2008 and 2011, the deficit had surpassed targets by more than €300 million while public debt surpassed targets by more than €600 million. No financial engineering would hide this fact. One should also bear in mind, he said, that there were various projects which did not appear on the government score-sheet. These included the Delimara power station, Transport Malta’s debts and the City Gate project.

The Bill was unanimously approved through all stages.