Robust public finance management systems are the foundations on which a sustainable economy must be built. The improvement over the past three years is impressive. However, a balanced review must look at the broad context and other factors that matter for the wellbeing of Maltese society.
Malta registered a budget surplus for the third year running thanks to economic growth significantly better than that of most EU Member States. Public debt has also fallen to 46 per cent of GDP from 70 per cent just a few years ago. Investment in infrastructure has been stepped up mainly to improve the creaking road network.
Finance Minister Edward Scicluna must be commended for keeping a steady hand on the rudder of public finances. He is also right to warn that the economy needs to slow down in the coming years because of infrastructural bottlenecks. What is less commendable is the lack of clinical analysis of the big picture, the backdrop to the country’s economic performance.
International institutions like the IMF, European Commission, rating agencies and Council of Europe have raised questions about the sustainability of the elements that drive the Maltese economy. This concern is not just about the sale of passports scheme. It is also about the increasing dependence on foreign labour to generate economic growth and the overreliance on economic sectors that depend on our low tax regime, which is being challenged by the major EU Member States. The dominant role of public and private consumption to boost economic growth is yet another unsustainable element of economic growth that needs to be addressed.
To this list, one must add the deterioration of Malta’s image as a reputable country with a strong commitment to good public governance and the curbing of corruption under the rule of law. The way some public contracts have been awarded gives rise to well-grounded suspicions that taxpayers’ money – to the tune of millions – is not going towards best-value-for-money jobs but to favoured bidders. Another shadow is cast by the not insignificant amounts being spent on the appointment of questionable government consultants, persons of trust and quangos.
Other concerns that attract little public attention are the poor achievement levels of our education system despite public expenditure on this sector exceeding the EU average. What country can aspire to long-term significant economic growth when it has one of the lowest achievement levels in education in Europe?
The public health system is also under immense stress as our general hospital is operating at full capacity at most times of the year. The situation in the country’s psychiatric hospital is even worse: facilities have been allowed to deteriorate terribly despite the improving public finances. The public health system will come under increasing pressure from demographics and capacity planning for the future is not evident at all.
Prof. Scicluna is right in stating that “as the economy keeps doing well, people start expecting the best of the health and educational institutions on the island”.
The future of Air Malta is another significant challenge to the government. What matters for the future of the national airline is not so much pinning the blame for strategic errors of the past but establishing whether the present strategy is viable. The ‘extend and pretend’ strategy that seems to be in force relies on stripping the company of valuable assets in return for publicly financed cash flows to keep the airline flying despite the loss of market share.
The deterioration in the quality of life is another issue that needs to be addressed with more determination. Increasing insensitivity to the need for environmental protection means more countryside spaces are being gobbled up by development projects and more urban areas are degenerating as a result of noise and air pollution and the building of high-rise blocks.
Also, while inflation may be low at the moment, there are certain areas like the housing market and salaries for highly skilled employees rising to levels that are either unaffordable or a deterrent to attracting new investment.
The Prime Minister has committed himself to leave the local political scene by the next election. He undoubtedly wants to be remembered as the political leader under whose stewardship Malta achieved the most impressive economic growth in its post-war history.
However, his administration will be judged in the long term also by his ability to make Maltese society a fairer one where economic growth is underpinned by principles such as sustainability, optimal use of taxpayers’ money, quality of education and health services, good governance and respect for the rule of law.
This is a Times of Malta print editorial