Finance Minister Edward Scicluna this afternoon told social partners that the government was on track to end the year with a 2.1 per cent deficit, even though by September there was a shortfall of €74 million.

Addressing the last pre-budget meeting of the Malta Council of Economic and Social Development, the finance minister said that this amount was mainly due to some €65 million which Enemalta owed the government in excise duty on fuel. This amount would be settled once negotiations with a Chinese state-owned energy company seeking to buy a minority stake in Enemalta would be over, as part of the proceeds will go to pay this bill.

A further €11m were issued early by the government in children;s allowances.

Prof. Scicluna said that in the first nine months of the year spending exceeded projections by €58 million whereas there was a shortfall of about €16 million in revenue.

Commenting on the outlook for next year, the finance minister said that it will be a very challenging one as the government will have to address the ailing finances of Enemalta, Air Malta and the public transport service which was nationalised at the beginning of the year until a new private operator takes over. Nevertheless he said that the government will end next year with a 1.6 per cent deficit.

Although he did not refer to any specific measures, Prof. Scicluna confirmed that indirect taxes (such as excise duties) will increase.

“One has to understand that each year indirect taxation has to increase due to the nature of the tax itself,” the finance minister said. On the other hand he noted that the reduction in income tax from 29 to 25 per cent will cost the government €20 million a year.

Regarding the cost of living allowance mechanism (COLA) Prof. Scicluna acknowledged that for low income families this year’s 58-cents weekly increase will not be enough, as they depended solely on this measure for any wage increase. He added that the mechanism had worked well since its creation 24 years ago, but acknowledged that there was an issue in extreme cases when the increase was either minimal or very high.

Prof. Scicluna urged the social partners to hold talks and put forward their ideas on what measures could be taken in such circumstances.