Steering on course?

Is Government on track in terms of achieving its fiscal targets?

The Opposition and opinion leaders sympathetic to it frequently speak of how some ministry or another is overspending and forking out outlays far beyond what was budgeted. At the same time, readers are told that the national debt is ballooning, and that the Minister for Finance is losing control of the situation.

Yet, the latest officially published data on the Government’s Consolidated Fund, covering the first ten months of the year, show no such evolution. Instead of a rising deficit, the official figures show that the deficit on the Consolidated Fund fell to €156 million, an improvement of 76%, over last year’s figures. This was not just the best financial result since 2019 but was even better than the deficit of €323 million observed in the first ten months of 2012.

The deficit in the first ten months of 2023 was less in absolute terms than it had been in the same period of 2012. One must keep in mind that today’s economy is about twice that of 2012, which means that, in effective terms, the deficit is about half what it was under the administration run by the same Nationalist Party which is today so vociferous about the “bad state of public finances”. This notwithstanding that, whereas today Government is forking out hundreds of millions in subsidies to keep Maltese households and businesses on the lowest fuel and electricity bills in Europe, under the Nationalist government the increase borne by Maltese families and businesses was twice the EU average.

January to October (actual)January to December (budgeted)Percentage of Budget targets for whole of 2023Comparison with outcomes which had been recorded in 2022
Revenue  €5,223 million€6,477 million81%77%
Recurrent expenditure  €4,659 million€6,177 million75%78%
Capital expenditure  €544 million€1,060 million51%67%
Interest expenditure  €175 million€210 million83%83%
Deficit  €156 million€969 million16%71%

The claims that Ministries are exceeding their annual budgets is also fallacious. The table compares spending till October with that budgeted for the whole year. Recurrent spending is at 75% of what has been budgeted for the whole year. Last year in October it had stood at 78%. Interest spending is at 83% the annual allocation, the same proportion as last year, and roughly on target as this is the proportion of the financial year that has passed. Capital expenditure is lower, at 51% compared to 76% last year, but it is expected that in the later months of the year this will picku up due to the need to spend EU funds quickly so that they are not lost. 

What is very striking in the Government finance figures for the first ten months of the year is the strength of the revenue figures. Tax revenue appears to be growing much faster than expected. Revenue is already at 81% the annual figure expected, up from 78% last year. At €695 million, the increase observed up to October is already more than that envisaged for the whole of the year. This suggests that economic growth is exceeding Government’s projections or that the efficiency of tax collection has improved more than expected.

As a result of this prudence in recurrent spending and better-than-expected revenue outturns, the deficit of the first ten months of the year was just 16% of that projected for the whole of 2023. In October 2022, the deficit was 71% of that budgeted for the whole year.

On the basis of facts and figures, rather than public finances developing in a way not consistent with plans, up to now the deficit is performing better than expected. Tales of overspending and out-of-control outlays appear to be wild exaggerations and Government seems well on target to achieve its fiscal goals for the year.

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