Updated5.47  p.m.

The Nationalist Party said this afternoon that NSO figures for the first seven months of this year showed that Government's financial targets were off-track, a claim denied by the Finance Ministry.

The National Statistics Office said in the morning that the government's deficit grew by €50 million to €309.5 million between January and July.

It said recurrent revenue registered an increase of €87.3 million, offset by higher expenditure of €137.8 million when compared to the corresponding period
last year, thereby widening the shortfall between recurrent revenue and total expenditure by €50.5 million.

Recurrent revenue was recorded at €1,631.1 million, up by 5.7 per cent over last year. The main contributors to this increase were social security contributions (€33.7 million), income tax (€30.2 million) and VAT (€27.0 million).

Conversely, Customs and Excise Duties registered a decline of €22.4 million.

Recurrent expenditure increased by €108.7 million, mainly as a result of higher spending on Programmes and Initiatives (€51.8 million). The major increases registered in the Programmes and Initiatives category were recorded in the social security state contribution, which also featured as revenue (€10.1 million), public service obligations (€9.9 million), medicines and surgical materials (€7.7 million), EU own resources (€3.8 million), the contribution to church schools (€3.6 million) and the ex-gratia grant scheme for motor vehicle registrations (€3.2 million), among others.

In addition, Personal Emoluments and Contributions to Government Entities increased by €28.1 million and €25.0 million respectively.

Operational and Maintenance Expenditure went up by €3.9 million.
The interest component of the public debt servicing costs for the period under review amounted to €131.9 million, an increase of €1.3 million from last year .
Expenditure on Government’s capital projects amounted to €226.2 million.

The increase of €27.8 million was mainly brought about by higher outlays on EU funded capital projects which were partially outweighed by a lower equity injection to the national air carrier.

At the end of July, Central Government debt stood at €5,267.4 million, up by €283.5 million over the corresponding period last year. This was the result of higher Long-term and Short-term Borrowing, which added €140.9 million and €126.9 million respectively. On the other hand, foreign borrowing went down by €10.6 million. As a result of consolidation, lower holdings by government funds in MGSs brought about an increase in debt of €21.1 million.

The euro coins issued in the name of the Maltese Treasury went up by €5.2 million when compared to the coin stock as at the end of July 2013, and totalled €58.4 million.

PN REACTION

In a reaction, shadow finance minister Tonio Fenech said the figures showed how the government's  deficit and debt levels have continued to spiral out of control, with the government seeking to partly make amends by reducing investment in areas on which the livelihood and quality of life of Maltese families depended.

The data showed, he said, that the deficit would be above the 3% (of GDP) mark by the end of the year. The Labour Government had so far increased Malta’s debt by €400 million, which was almost €1,000 per head!

"This is a result of a drastic increase in government expenditure – which, excluding the areas of social security and education, shows an increase of no less than €100 million," Mr Fenech said.

The government was seeking to reduce costs by removing local council elections. It had also stopped some investment support schemes, but it had no problem in spending close to €60 million more in salaries and operational expenditure, Mr Fenech said.

"In terms of private sector profitability, the latest NSO data on finance also confirms the evident difficulties afflicting the sector: although income tax revenues increased in 2014 over 2013, this increase was over 50% lower when compared to the increase registered last year (over the previous year).

"This data points towards one simple conclusion – a Government which is clearly off-track in its financial goals," Mr Fenech said.

He called on the government to review its  expenditure, particularly in terms of increased spending in the public sector, and not to resort to cutting off crucial expenditure items on which the livelihood and quality of life of Maltese families depended.

FINANCE MINISTRY DENIES CLAIMS

The Finance Ministry in reply said government finances are on track and are in line with the projections laid down in the 2014 budget.

"Indeed, on the revenue side, government finances are performing better than expected, increasing by as much as €38.8 million beyond what was forecast."

The ministry said a cash flow shortfall in excise duty due by Enemalta will be made up fully before the end of this year and accrued accordingly. There was  therefore no effective increase in the central government deficit over last year.

"Furthermore, both income tax and social security contributions recorded an increase when compared to projections. In fact, revenue from income tax increased by €24.6 million while revenue from social security contributions recorded an increase of €14.2 million.

"This reflects the sustained generation of employment driven by a strong employment growth rate that is among the highest in the European Union. Revenue from other non-tax revenue sources were also broadly in line with projections."

On the expenditure side, the ministry said total expenditure was marginally below what was projected for the 2014 budget. 

“The NSO’s figures continue to confirm that Government finances are in line with the budget estimates and Government is confident that we are on track with regards to reaching the deficit target for this year,” Finance Minister  Edward Scicluna said.

"It is highly ironic that the Opposition’s Shadow Minister for Finance, under whose watch the country entered into Excessive Deficit Procedure (EDP) twice in the space of a few years, and who left as his inheritance a public energy corporation on the brink of collapse, is now attempting to undermine the economic and fiscal successes this government has managed to achieve."

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