Government finances improved during the first two months of the year, despite a substantial increase in recurrent expenditure.

Data published yesterday by the National Statistics Office shows that by the end of February, the deficit stood at €74.5 million, a 28 per cent drop over the same period last year.

Government income grew by 10.5 per cent to €483 million.

Expenditure also increased, by three per cent, to stand at €557 million.

The NSO attributed the increase in revenue to a number of factors including more revenue from income tax (+€35 million), from VAT (+€30 million), social security (+€6 million) and Customs and Excise duty (+€5 million).

In the first two months of the year, the government had to pay out an additional €10 million in contributions to its entities, €7 million extra on operations and maintenance payments and €5 million more on personal emoluments.

In reaction, the government considerably reduced its expenditure on capital projects, slashing the budget by 15 per cent.

Funds allocated to Air Malta were down by €11 million this year as part of the ongoing restructuring programme.

The NSO said that, by the end of February, government debt amounted to €5,095 million, up €313 million over the same period last year.