No nation can prosper if public finances are not managed with prudence to ensure that over the medium term, expenditure does not regularly exceed income. The times when governments could simply increase taxation to balance their books are long gone as the economic downturn that started in 2008 continues to linger on despite central banks cutting interest rates to historically low levels.

The news that in 2016 the government’s consolidated fund registered a small surplus, the first time since 1981, is good news. Economists could see this coming as GDP growth in the last few years has been significant, especially when compared to that of other EU countries. One can understand the hubris of the government team when the NSO’s statistics were announced.

Yet the Prime Minister himself sounded a word of caution, as it is inevitable that the good times will not last forever. One year’s positive public finance statistics do not justify a spending spree, especially in an election year when politicians’ main focus will be to curry favour to get re-elected.

There are already some worrying signs. Despite the Prime Minister’s sensible comments, some government organisations appear to be in recruitment mode, bloating the public sector payroll even further. Such tactics could undermine future fiscal rectitude, which should be the backbone of every national economic strategy.

Malta’s good performances in tourism, financial services, construction and the gaming industry are currently the most important catalysts for economic growth. This in turn has led to bigger expenditure by households, which normally feel better off when the economy is performing well. Of course, not everyone has benefitted in the same way in the last few years.

Another concern that the Prime Minister and most other people have is that the country’s productive and physical infrastructure is crumbling. Badly maintained roads that are no longer fit for purpose, a shortage of social housing, a public health system that is underfunded in the context of big demographic changes and an educational system that despite substantial expenditure continues to underperform – these are major challenges.

Admittedly, some major road works have started and one hopes that this will ease some of the pressures that motorists face on a daily basis. Attempts are also being made to provide more hospital facilities. But some will argue that what is needed is a long-term plan to cater for the country’s needs in the next two or three decades.

Like most countries, in the last two decades the income gap between the haves and the have-nots has been widening. If the economy is there to serve society, then a better distribution of wealth is needed to ensure that it is not only public finances that are improving but also the quality of life of the majority of people.

The proposed increase in the minimum wage could help those who are today referred to as the ‘working poor’. But there are also other poor people who unfortunately cannot help themselves because of illness or a distressed social background that makes it difficult for them to climb the social ladder. More needs to be done to instil new hope in this important minority in our society.

The 2016 results in public finances should act as a stimulus to address the unfinished business that if completed successfully would enable most people to share the fruits of economic growth.

The government needs to build on last year’s fiscal success by investing more in the long-term interests of the whole of our society.

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