Let’s be smarter with money

The President of the Republic made some commendable suggestions in his New Year’s message to the people on the need for swifter justice and for national unity.

His appeal for people to spend less in anticipation of further “rainy days” ahead, while also positive, in my humble opinion deserves some qualification and refinement.

Prudence is undoubtedly a positive virtue and must be encouraged. Nevertheless, I firmly believe that the best way to shore up our defences against the continued financial turbulence is to ensure that our people are productive and innovative as well as careful with their money.

I must emphasise that offering information and guidance to people is also crucial. People ought to be well informed to fully understand the consequences of their expenditure and of indebtedness.

They must be educated on the levels of expenditure they are able to afford and how they can spend their money more efficiently.

How they consume energy is a perfect case in point. There is no point is spending astro-nomical figures in electricity if they can get by with less, merely through efficiency.

Information about managing debt is also important. It is certainly not wise to borrow for capricious means but people should be guided about the benefits of borrowing money for major purposes like property and cars with medium-/long-term repayment schemes.

I feel that offering clear guidance to people is extremely important to ensure that our messages are not misinterpreted. It is important to note that taking a step back collectively can also have its negative economic repercussions.

I feel that the importance of money in circulation must be emphasised. Money is the lifeblood of any economy. We need to encourage its circulation because, unless it does, the economy cannot breathe and it will stall, generating hardship on us all.

In truth, Malta has a long tradition of sound financial management. Across all levels – government, the banking system and ordinary citizens – Malta has historically acted most prudently in managing resources at its disposal. We Maltese have traditionally been guided by the “save to spend” notion, as opposed to “borrow to spend”. Indeed, this national trait has proved to be our country’s salvation from the financial turbulence affecting the globe since 2008.

Malta has other solid fundamentals in place to support it in facing the continuing surrounding financial turbulence. Our unemployment levels are certainly no cause for concern and, despite a slight oversupply problem, we have no property bubble either.

The soundness of our banking system continues to be a great asset for Malta and remains a key component in our defences against the global financial crisis.

The way forward for our country is to build on these solid foundations by being more competitive. We must ensure we are more efficient and innovative in whatever we do to ensure we are constantly ahead of our competition. It is imperative that we do not get carried away by our relative well-being and expect to be pampered by conditions that could threaten our competitiveness. Malta must not depart from the notion of wealth creation before wealth distribution. If we adhere religiously to this belief, we can guarantee our economic well-being and the social model we have grown accustomed to.

There is no denying that competitiveness brings growth and growth is the best defence against economic malady. If a country grows and manages its resources judiciously, it will be in a position to control its debt in much the same way as a household can afford to spend and pay its mortgage as long as it is fit and able to work and earn its income. In my view, it is all about managing resources appropriately.

Business is all for prudence and control but it is also for education. It is our duty as political and business leaders to guide people towards enhanced living standards. In the face of prolonged economic hardship on a global level, political and business leaders must guide and inform people about being more competitive to protect their jobs. They must also provide adequate guidance on enhancing their quality of life by being smarter with their money.

The author is the president of the Malta Chamber of Commerce, Enterprise and Industry.