During the first eight months of the year, the Maltese government achieved a surplus of €99 million, surpassing all previous records for the same period. In sharp contrast, in 2012 the deficit by August had reached €268 million.

Consolidated Fund position: January to August

Last year in the same months there was a deficit of €90 million. This means that during the first part of this year there has been an improvement of €189 million in public finances. This unprecedented sharp improvement, which is well above what was anticipated in the Budget, came about because government revenues grew at a much greater rate than the output increased.

In fact, Government revenue grew by a record €693 million, or more than 17%. Most of the increase was due to higher income from income tax, stamp duty, and VAT. This reflected the sustained economic growth of the Maltese economy.

Government expenditure grew by less than the increase in revenue, with a rise of €504 million. More than one third of this increase was due to improvements in social benefits, including pensions and children’s allowance. There has also been an increase in the public sector wage bill, due to an improvement in the working conditions of various categories of public servants.

Due to the positive performance of public finances between February and August this year, central government debt decreased by almost €26 million.

All this bodes very well for the next Budget, which will feature a tax cut and several improvements in social benefits.