Updated 12.32 p.m.
The Nationalist Party said today that the underlying message in the Fitch downgrade of Malta's long term credit rating was that the present government had no economic plan and it was not credible.
Fitch yesterday downgraded Malta's rating to A from A+.
The PN said the agency's decision was motivated by the fact that Malta's financial situation had deteriorated, first because the then Labour Opposition decided to vote against the Budget for 2013 and now because of the total lack of an economic plan.
The agency had also noted how under the present government, the EU placed Malta under an excessive deficit procedure. That was caused by the government's decision to underline last year's deficit without presenting a convincing plan for corrective action.
This downgrade, the PN noted, came after a drop in exports and a rise in unemployment.
Malta had enjoyed a Fitch A+ rating for five years after the former government took Malta into the eurozone. The present government now needed to realise that the general election was past and it needed to assume its responsibilities, the PN added..
Earlier today, the Finance Ministry in a statement said it was addressing the problems noted by rating agencies Fitch and Moody's in recent reports.The Fitch and Moody's reports reflected the consequences of the poor fiscal performance registered during 2012 which led to a deficit of 3.3% of GDP - well above the previous administration’s target of 2.2% and Fitch’s own September 2012 projection of 2.6% of GDP.
"This significant fiscal slippage, a situation that the new Government has inherited, was recognised by various international agencies, including the International Monetary Fund, as being linked to excessive spending and overly-optimistic revenue projections during the period leading to the 2013 General Election. With its decision, Fitch is echoing the same position adopted by other international Credit Rating Agencies in 2012 prior to the election, which had expressed considerable scepticism regarding the fiscal targets announced by the previous administration," the ministry said.
"Fitch’s report itself is also a fair assessment of how Enemalta’s precarious financial situation is endangering the stability of Malta’s public finances. Fitch rightly notes that Government-guaranteed liabilities rose from 11% in 206 to 17.6% of GDP in 2012, 60% of which relate to Enemalta which had been left to deteriorate by the previous administration and accumulate a debt in excess of €800 million."
The ministry said it had noted Fitch’s recommendation that a very significant positive reform was on which controlled contingent liabilities, which at the moment total €1 billion, and through concrete progress with the restructuring of the state owned enterprises, principally, Enemalta.
It pointed out, however, that Fitch’s report discusses the situation prior to the signing of the Memorandum of Understanding between Malta and China which will see China Power Investment Corporation investing upwards of €200 million into Enemalta. Once approved by Parliament, the deal would contribute to the halving of Enemalta’s €830 million share of the Government’s contingent liabilities.
"Indeed, the new Government’s reform of the energy sector is
aiming at lowering energy cost and returning the loss-making entity to financial health," the ministry said.
Moody’s had endorsed the Government’s solution for Enemalta in its report, and confirmed that this will allow the Government to strengthen Enemalta’s financial position.
In its report Moody’s forecast that Enemalta would start registering a profit by 2015, reducing the need for budgetary support and containing further contingent liabilities
The ministry said the new Government is undertaking several initiatives to curb public expenditure, increasing efficiency and maximising revenue so as to end this year with a deficit below 3% and about one percentage point less than what other independent observers were forecasting.