Few of us believed that the budgetary targets for 2012 would be met. It was obvious half way through last year that the projections set were too optimistic. Now Eurostat has confirmed how wrong our former Minister of Finance was.
Our public finances are far from sound and were surely not in safe hands
Still, Tonio Fenech keeps insisting that, up to the eve of the last election, “the latest figures we had in hand were in the region of 2.5 to 2.7 per cent of the GDP” (April 6).
Fenech tried to cast doubt on the figures presented by Edward Scicluna, the new Finance Minister, by arguing that the figures did not include money due from Enemalta Corporation. Little did he care that the figures were the work of the National Office of Statistics and top officials at his previous ministry. It would have been better had Fenech explained how the discrepancies had arisen.
Equally worrying is the fact that the discrepancies were found in three sets of budgetary data: that as outlined in the budget speech, as per financial estimates presented to Parliament and as drafted in the bills accompanying the budget. Confronted by such gross mismanagement, the PN government, instead of making an apology to the Maltese people, just tried to save its face and went into denial. Old habits die hard; even with a discredited administration.
The figures as confirmed by Eurostat bring no joy, with the general government deficit for 2012 shooting up to €362.3m (3.3 per cent of GDP). This is a full one per cent of GDP higher than the one the previous government had forecasted.
This, of course, was not the first time that Fenech got his estimates wrong. In the five budgets presented (2008-2013), only once was the forecast on target. Under Fenech’s stewardship, actual government deficit amounted to €1,251m against forecasted deficits (at budget speech) of €724m. This represents a massive difference of €527m (73 per cent). The national debt, during the tenure of the last administration, rose from €3,385m to €4,900m. This is an increase of €1,515m (45 per cent). Our public finances are far from sound and were surely not in safe hands.
In voting in favour of the 2013 Budget, the Leader of the Opposition described it as “a message of stability and seriousness by a constructive Opposition” (April 9).
We have heard enough about stability in the last 15 months and I’m not so sure about the constructive opposition. Hopefully, it is still early days and the PN is finding it hard to digest the fact it is no longer in power. No one expects the Opposition to keep silent, but at least it should have the decency to think carefully before consistently criticising the new government even on petty things.
The PL government wants a change of direction even in the way that public finance is prepared and presented to the people. It wants to win the trust of the EU Commission, credit rating agencies and investors through transparency and not by resorting to ‘creative’ accounting. Transparency also generates greater accountability. There is little harm in showing the financial situation as it is. What is more important is that a government constantly manifests its commitment to abide by its EU obligations .
Eurostat’s confirmation of the 2012 Budget figures subjects Malta to the possibility of facing excessive debt procedures by the EU. This is the third time in the last 10 years. Similar procedures were only withdrawn last November, just before the Nationalist administration presented its ‘electoral’ budget. The matter will be discussed in Brussels later this month. Malta is not the only Eurozone country facing such charges; so are among others France, Portugal and Spain. This is no consolation and if our country is to avoid sanctions, then it has to present a “credible” strategy as to how it intends to reduce the Government’s deficit and work towards a balanced budget.
Faced by this financial scenario, the Prime Minister has consciously kept a positive stance. Joseph Muscat stated that, “The state of finances is not as they told us but we expected this” (April 6). It is because he realises how crucial it is to transmit confidence and a sense of fiscal stability that prompted him, last November, to declare that if elected the PL would keep Budget 2013 unchanged even though he did not necessarily share the mind-set and values of those who drafted it.
Even in 1996, the PL found a difficult financial situation, but this time round it appears to have learnt an important lesson. The Minister of Finance has made it known that work on the 2014 Budget is already in hand with the targeted deficit being raised to 2.7 per cent of GDP. This represents a reduction from this year’s deficit but is higher than projected by the PN government due to a forecasted drop in revenue of €44m and an additional cost of €24m to make good for its pre-election spending spree.
Scicluna has also said Malta will be working to honour its fiscal pact obligations and over the next years will seek to implement a deficit-reduction programme of 0.6 per cent per annum.
Economic growth remains the primary key to shaping up our public finance. The new government seems keen to facilitate new private investment and to enable the private sector to operate without excessive bureaucracy.
fms18@onvol.net