Official figures have shown that Malta’s deficit increased by €64 million compared with last year, but Finance Minister Tonio Fenech yesterday said there was no cause for concern.
Expenditure is much more constrained now that we have no working Budget
The minister also noted that, with Government having no 2013 Budget to work with, expenditure was likely to be muted in the run-up to March’s general election.
Revenue the Government is due to collect in the first two months of the year would even out the figures and keep Malta on track to meet its deficit and debt targets, the minister said.
“These statistics are issued on a cash basis, so they don’t necessarily reflect the final figures,” Mr Fenech said.
“Income tax revenue for the first two months of any given year is tallied up with the previous year’s income, as is January VAT revenue. So while expenditure stops at the turn of the year, Government revenue continues to flow in for a further couple of months.”
Asked why this would make a difference, given that last year’s provisional totals also included this caveat, Mr Fenech pointed to economic growth.
“It isn’t the same as the previous year, because the economy has grown and that, in turn, bumps up tax revenues,” he said.
Official statistics released earlier last week showed a two per cent gap between Government expenditure and revenue for the first 11 months of this year. As a result, the deficit – the gap between money flowing in and that going out – now stands at €342 million.
Cynics expecting the Government to start flashing the cash in the months preceding the election are likely to be disappointed, with Mr Fenech saying the Government’s hands were tied.
“Expenditure is much more constrained now that we have no working Budget. The Government can’t, for the sake of argument, start next year’s Budget and decide to spend six month’s worth of expenditure in the first three months of the year.”
The law, the minister said, forbade the Government from spending more in recurrent expenditure than it had in the first four months of 2012.
Mr Fenech also singled out assistance given to struggling energy corporation Enemalta as having distorted the figures somewhat.
“Enemalta is under severe pressure from high oil prices, but the Government has taken a conscious decision not to raise electricity tariffs. That has meant that Enemalta has fallen back on excise duty payments.”
Enemalta is believed to owe the Government some €50 million in duty dues.
The Government has successfully lowered the national deficit over the past four years to below three per cent of GDP, convincing the European Commission to stop excessive deficit procedures it had started against Malta.
Mr Fenech has said he expects the country to end this year with a 2.3 per cent deficit, falling to 1.7 per cent by the end of next year. Rating agencies and the European Commission have projected slightly less optimistic numbers, but expect Malta to remain within acceptable deficit parameters.