Malta’s 2026 fiscal budget is a key tool for implementing the government’s economic and social policies. With fiscal policy increasingly important since Malta adopted the euro, the government aims to sustain economic growth, maintain low debt levels, and strengthen financial stability, all while supporting citizens and businesses.

Tomorrow, Finance Minister Clyde Caruana will deliver the fiscal budget for 2026. The budget is not simply an accounting exercise; it is a primary tool for implementing the government’s economic and social policies, among other objectives. Since Malta adopted the euro in 2008, fiscal policy has become increasingly important as a tool to manage the economy, given the loss of two significant economic instruments: the level of interest rates, now set by the European Central Bank (ECB), and the exchange rate, as the euro is a floating currency.

Labour governments have pursued growth-oriented policies in contrast to the austerity measures imposed by Nationalist administrations and some other European governments. The reasoning is straightforward: economic growth generates higher tax revenues even without changes to the tax regime. Numerous pro-growth measures have been implemented, including free childcare services that enable more women to join the labour market, income tax reductions, stamp duty exemptions for first-time buyers, pension increases above the cost-of-living adjustment, supportive measures during the pandemic, and the stabilisation of energy prices. It is the government’s duty to remind citizens that economic success is the result of robust planning and should not be taken for granted.

In this context, it is important to recall the recent economic positions of the Nationalist opposition, which continue to emphasise austerity. For example, they have called for the cessation of energy subsidies, which are vital for both industry and households. According to the European Commission’s spring economic forecast, Malta’s fiscal deficit is expected to be around 3.2 per cent of GDP in 2025 and is forecast to decline to 2.8 per cent in 2026, which is below the 3 per cent threshold. If this forecast is achieved, it will improve the prospects for Malta to exit the Excessive Deficit Procedure.

Meanwhile, the public debt-to-GDP ratio is expected to remain below 50 per cent, compared with the EU average of 82.2 per cent in 2024. Most of Malta’s debt is composed of Government Stocks, with over 80 per cent held by domestic retail investors and credit institutions. This has two important implications: it shields the Maltese economy from capital outflows that are sensitive to market speculation, and the interest paid on outstanding debt remains within the local economy. Fiscal discipline is also important for local companies issuing bonds, as it affects the pricing of their bonds, which must pay a premium over government bond yields to reflect higher credit risk.

There is no doubt that the fiscal budget for 2026 will continue along the path towards sustainable economic growth. Nevertheless, the Labour government must keep in mind that economic success will continue to change the priorities of Maltese citizens.