Getting the facts right about national debt

The Conservative party in opposition has once again gone on record attacking Government on its fiscal management. According to its spokespersons, the latest data show that the national debt has reached a record level and is out of control.

Yet, a statement issued by Eurostat clearly indicates that between the second and the third quarter of 2021 Malta’s national debt ratio decreased from 59.1% of GDP to 57.2%. This was the first quarter-on-quarter reduction in the national debt ratio since the pandemic began in early 2020. In fact, with the reduction observed, the debt ratio at the end of September 2021 was even slightly lower than it had been in the first quarter of 2021.

These improvements reflect two factors.

Malta’s finances are recovering

Firstly, contrary to what the Opposition claims, Government’s finances are recovering from the blow of the pandemic. In fact, another Eurostat statement indicates that the Government deficit in the third quarter of 2021 was 8.1% of GDP, less than the 9.6% recorded in the same quarter a year earlier.

This was the second consecutive quarter that this happened. In the second quarter of 2021, the deficit was 7.9%, when a year earlier it had been 13.3%. Hardly a case of losing fiscal control.

Malta’s GDP is growing substantially

The second factor behind the reduction in the public debt ratio is that GDP is growing substantially, making it easier for us to finance debt. The strength and rapidness of this recovery is due to the generous support policy that the current administration has embraced.

The fact that our country has had a level of aid better than the European average, as well as our national Government shielding people from the fuel and electricity price shocks faced by other Europeans, is leading to this sustained economic recovery.

Comparing both administrations’ records

Opposition spokespersons continue to adhere with the austerity philosophy that led to the 2008 economic blow resulting in six years of higher unemployment.

Instead, the progressive economic policy of Robert Abela’s administration has led to the lowest level of unemployment in Malta’s history.

Moreover, instead of the ever-increasing taxes and inflation seen in the aftermath of the 2008 downturn, we now have the lowest tax burden in history, as well as the lowest price of diesel and electricity among euro area countries for the first time in history.

While shrill warnings about public debt burden are issued by Conservative spokespersons, the truth is that in March 2013 Malta’s national debt burden stood at 69.8%, almost 13% more than the current rate. It was only in the first quarter of 2008 that the national debt was below the 60% threshold, at 59.7%.

Despite the pandemic the current administration, up to now has never registered a national debt ratio that exceeded what was the best fiscal result of a Nationalist administration.

This means that what the Conservative spokespersons today criticise as unsustainable is still better than the best they ever achieved when they were in control of Government finances.

Under Labour we have not had a national debt burden above 60% since the second quarter of 2015, i.e. for more than five years. By contrast, in the last five years that the Conservatives were in government the country always had a debt burden of more than 60%.

Basic mistakes in public statements

Moreover, the Nationalist Party’s incompetence in public finance management also stems from the fact that theirpublic statements are full of basic mistakes.

They argue that the latest debt figures are a record amount. However, Eurostat’s statement clearly shows that while in the second quarter of 2021 the national debt was €8,026 million, three months later it had fallen to €7,989 million. How can a figure smaller than the one occurring before it be called a new record?

The need for a wholesale renewal in the Conservative camp where it comes to fiscal and economic policy has never been greater than it is at present.

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