In EU aftermath, state finances
reveal Maltas economic burden
Concern was expressed to The Malta Financial and Business
Times yesterday over the state of Governments finances for 2002,
which have revealed yet more shortcomings in the administrations
performance for the last year with figures harking back to the darker
days of the pre-1998 economy.
Public expenditure has now grown exponentially as a percentage of the
gross domestic product, another reminder of the untenable forces within
the Maltas economy.
Total expenditure registered Lm819.3 million, an increase in Lm52.7
million since last year. Recurrent revenue amounted to Lm719.8 million.
The structural deficit is increasing at a faster rate than in previous
years. The shortfall has increased to Lm87.7 from 2001s Lm85.3
million. While between 2000 and 2001 the increase in the deficit was
of Lm113,000 only, this years deficit registered an increase of
GRTU Director-General Vince Farrugia yesterday voiced his concerns that
the state of the economy would be degenerating unless the country increases
"We can now see an economy unable to grow at a rate faster than
that of our expenditure. Worse still, we are moving backwards. There
was a time when we were lowering the ratio of public expenditure to
GDP. It has now gone up to a very dangerous 63.9 per cent of GDP."
Farrugia said expenditure had been greater in the case of the public
labour force, which has a strong and organised union presence, and also
many social forces asking for more public service investment and capital
"Unless the economy is pushed and steered into greater growth,
we shall be in trouble. Economically we are in a cul de sac, and we
have seen this coming from one set of figures to the other.
"We have reached the end of the road economically, having squeezed
as much as we can from tourism. Tourism is the springboard we need,
and we have to do our utmost within such consultation models such as
the MCESD to push productivity and competitiveness upwards.
"What the business community fears is that the Finance Ministry
would be thrown into panic, and that it would start to issue more payments
and fines to the business community."
Leo Brincat, expressing his personal opinion as an economist, said Governments
predictions on the countrys finances were never justified and
that the state of the structural deficit had now gone beyond government
"Public debt servicing does not compare justifiably
with the level of expenditure for social services or education. Governments
expenditure is just not being applied productively in areas where it
is really needed.
"The problem is however recurrent expenditure. Government does
not have any cost-control, waste-control measures to instil a certain
discipline within its departments and entities.
"Of course, this was the problem when Labour was in government
as well. Everybody used to pass the buck. Basically, we need a culture
change. The private sector operates a proper and disciplined form of
cost-cutting which does not necessarily mean job shedding. It looks
for the fat in the operation and deals with the problem. But Government
does not seem to be doing this very well."
Recurrent expenditure amounted to Lm646 million for 2002, up by Lm31.4
million since last years.
Personal emoluments, which form part of this expenditure, increased
by only Lm1.5 million since last year, where wages stood at Lm196.5
million. Operational and maintenance expenses reduced their outlay by
Lm2.1 million to Lm43.2 million. Special expenditure also decreased
by 16.9 per cent over last years Lm700,000.
Increases in expenditure were registered in the outlays in social security
benefits (Lm6.3 million), social security state grant (Lm600,000), pensions
(Lm1.5 million), implementation of the EU acquis (Lm4 million), the
Agriculture Support Scheme (Lm1.7 million) and e-Government initiatives
Capital expenditure increase by Lm17 million to Lm97.7 million. The
bulk of the expenditure was carried out on such projects such as the
Mater Dei hospital in Tal-Qroqq, where expenditure increased by Lm10.6
million, on roads, with an increase of Lm2.4 million in expenditure
and the Shipyards voluntary retirement schemes (Lm5.2 million).
Government debt increased by Lm64.3 million to a total of Lm1,077 million.
Public debt servicing has increased to Lm76 million, up from 2001s
Treasury bills and Malta Government stock accounted for Lm218.8 million
and Lm813 million respectively. The remaining Lm45.1 million was made
up of foreign debt, which includes a Lm10.7 million loan for the new
hospital taken from the Council of Europe Development Bank.
Recurrent revenue amounted to Lm720 million, increasing by Lm51 million
since 2001. The sale of Malta International Airport government shares
yielded Lm21 million in capital gains tax, duty on documents and dividends.
Governments receipt of Lm27.3 million from the sale of the MIA
shares have not been included in the calculation of the structural deficit
since these are not recurrent forms of revenue.