Updated at 4.38pm, adds Opposition statement

The government deficit at the end of February was €62.9 million, a stark change from the surplus of €18.7 million recorded a year before.

Figures released by the National Statistics Office indicated that the deficit was the result of more spending on both recurrent and capital items.

During February 2019, debt stood at €5,440.4 million, an increase of €31.4 million from the corresponding month last year. This was primarily the result of higher Treasury Bills (€198.3 million) and the 62+ Malta Government Savings Bond (€92.6 million). Higher holdings by government funds in Malta Government Stocks also resulted a decrease in debt of €17.0 million.

During the first two months of 2019, recurrent revenue amounted to €689.2 million, an increase of €31.3 million. This represented an increase of 4.8 per cent over the €657.9 million reported in revenue during the same period in 2018. This difference was primarily the result of an increase in Income Tax
and Social Security.

Total expenditure at the end of February 2019 stood at €752.1 million, a 17.7 per cent increase over the first two months of 2018.

Recurrent expenditure stood at €650.9 million, €73.9 million higher than the corresponding amount reported in the same period last year. The main contributor to this increase was a €53.2 million rise in Programmes and Initiatives – mainly added outlays due to EU own resources (€24.8 million) and social security benefits (€12.4 million). A drop of €2.8 million in treasury pensions slightly off set this rise in outlay.

The interest component of the public debt servicing costs amounted to €36.7 million, a €0.4 million increase from 2018.

Government’s capital expenditure registered an increase of €38.7 million over the same period last year and amounted to €64.5 million.

The rise in outlay was mainly due to added expenditure reported on EU Internal Security Fund - Borders and Visa (€14.6 million) and road construction and improvements (€14.2 million).

€35 million surplus needed for December to avoid deficit - Opposition

The government needed to close off December with a surplus of €35 million to avoid ending the year with a deficit, the Opposition said as it requested more information on the situation.

Finance shadow minister Mario de Marco said in a statement that according to data published by the National Office of Statistics, the deficit accumulated in the first two months of the year amounted to €62 million representing a 436% negative change on the situation in the corresponding period of 2018.

The deficit in February, amounting to €8 million, pointed to a trend of monthly deficits going back to October. That month, the government sustained a deficit of €27 million, followed by a deficit of €11 million in November and €55 million in January.

Dr de Marco said the Opposition had, over the past years, cautioned the government on the accelerated increase in recurrent expenditure, at a time when the country was experiencing elevated growth rates.

This expenditure was being financed by one-off or short-term revenue streams - such as proceeds from the IIP scheme – potentially leading to budgetary shortfalls in the medium to long-term.

This point was also made by the European Commission in the Country Report on Malta 2019, published on February 27.

This report highlighted significant risks to the long-term sustainability of government finances. It pointed out "possible risks associated with financing permanent expenditure increases from potentially temporary revenue flows".

The Opposition reiterated its call for fiscal and political responsibility in the interest of future generations.