Enemalta has now moved to the top of the crisis agenda, propelled there by the government’s preparations for the coming general election. It is, said the Finance Minister, the greatest challenge facing the country. The government’s way of facing that promise is to perform a remarkable somersault. One necessitated by political considerations, which contradicts the often stated policy on the corporation and puts its financial future and the government’s structural deficit targets at fresh risk.

The corporation has around €600 million of debt- Lino Spiteri

The official policy on water and electricity tariffs has been clear – full recovery of costs essential. That policy led to rises in utility tariffs which had a dismal effect on both household consumers as well as the economic sector. The government expressed regret but said it had no option.

It also lambasted the opposition over its promise to reduce tariffs if elected to office at the next general election. The opposition has yet to explain how it proposes to fulfil its promise. Efficiencies must lie at the heart of it, with Enemalta’s costs being made up as to 70 per cent from fuel inputs and 30 per cent from manning, depreciation, financial and other costs.

The government has constantly challenged the opposition’s proposal, claiming that reduced tariffs were only possible if the government gave Enemalta increased subsidies out of public funds, implying a higher deficit, increased borrowing and so more debt servicing costs.

Now the Finance Minister has anticipated the opposition as charged by him. Yesterday week he committed the government not to increase the tariffs. He did not say for how long, giving the impression it would be forever and ever. He also said that non-core Enemalta costs totalling some €25 million annually would be taken into the public account.

The brazen manner of announcing these measures is breath-taking. Enemalta operates at a loss. The Finance Minister forecast it was impossible to remove that loss. He should know – the corporation is part of his portfolio. He had all the details, even when his charge was not publishing audited accounts.

The question is, if Enemalta is operating at a loss, will that not grow if its costs rise but it cannot increase tariffs by government diktat? That diktat gives rise to further contradiction. The government had defended tariff rises, despite widespread criticism on both social as well as economic grounds. It is now saying it cannot increase tariffs further without social and economic consequences.

True enough – but where does that leave the principle of full cost recovery? Where does it leave Enemalta? The corporation has around €600 million of debt. Even if that is restructured to be placed on a longer term basis, which will probably only be possible against a state guarantee, the debt will still have to be serviced. With Enemalta forecast by the minister to remain in the red, how will it be able to provide for debt repayment?

More: Enemalta is also expected to borrow to pay for a proposed connection with Sicily costing €200 million. Who will give it fresh lending to do that? Rather obviously the new loan will require another government guarantee, making it a de facto sovereign loan. Obviously too, Enemalta – forecast to operate at a perpetual loss – will not be able to set up a sinking fund to pay off the new loan, meaning that, together with restructured loss, it will have to be rolled over on maturity.

This is as close to financial madness as one can get. It is also blatantly misleading. Enemalta’s debts will not form part of the statistical public debt, reining in the ratio to GDP.

But that will be a sham. One of the three major rating agencies has already spotted that. If the other two remain at ease, institutions like the IMF may not be so accommodating.

Enemalta’s increased debt will be carried forward for the next government and others beyond it to deal with as best as they can. I find it remarkable that the Minister of Finance feels he can fool so many interests at the same time. He evidently banks on a political calculation – if he is criticised, as I am criticising him, but by some serving politician, he will claim that the opposition is in favour of raising tariffs.

That would be less than a serious approach. The opposition has to explain how it proposes to reduce utility tariffs. The government has to truly explain the impact on Enemalta and the public deficit of its somersault. The people cannot be fooled all the time, nor endlessly cosseted for political purposes.

Enemalta is in its predicament, worse than Air Malta according to the Finance Minister, because of total irresponsible neglect over 23 years of Nationalist government. When the short-lived Labour government of 1996-98 tried to start taking remedial action the Nationalist opposition howled ferociously, with the equally ferocious backing of Dom Mintoff. Now, 15 years later, a Nationalist government is again playing politics with Enemalta, and also with the public deficit. As the government used to say, if it passes Enemalta expenditure to the public finances, the addition will impact the deficit, worsening it. Yet the Finance Minister tried to juggle even that away.

This is a terrible way to tackle the tariff situation. It simply tries to fool people for more time, postponing the day of reckoning. Unless such trickery is revealed, we shall be moving into a fiscal future which will be bleaker than what we have seen so far.

What on earth have the Maltese people done to deserve all this?