Government revenues on the increase, but public debt continues to grow

The Maltese government deficit has fallen over the first six months of 2016, with a €47.3m reduction in the consolidated fund deficit.

The result was boosted by a €49.7m increase in recurrent revenue to €1.7bn for the first half of 2016, up from €1.6bn for the same six month period in 2015.

This increase was largely driven by an uptick in revenue from Income Tax and Social Security, increasing by €58.4m and €36.2m respectively.

The Maltese government also benefitted from an increase in revenue from Licences, Taxes and Fines (€21.1m), Value Added Tax (€18.9m) and Customs and Excise Duties (€17.4m), whereas proceeds from Grants dropped by €98.8m.

Meanwhile, while revenue grew significantly between January and June 2016, increases to government expenses were more modest.

Total government expenditure over the first half of 2016 stood at €1,767.7m compared to €1,765.4m for the same period in 2015, an increase of just €2.3m.

This was largely a result of added outlays on recurrent expenditure, which was mostly offset by lower spending on capital expenditure and interest payments.

Recurrent expenditure increased by €86.4m to €1,529.6 (H1 2015: €1,443.2m), largely driven by a €31.9m increase to Programmes Initiatives. This was made up of higher social security benefits (up €15.3m), a rise in the social security state contribution (up €10.8m), added outlays for church schools (up €10.5m), CHOGM (up €4.4m) and a €3.5m increase in expenditure for the provision of spare capacity electricity.

Increases were also registered in Contributions to Government Entities (€23.2 million), Personal Emoluments (€18.3 million) and Operational and Maintenance Expenses (€13.1 million).

This significant increase, however, was offset by a €4.4m decrease in the cost of public debt servicing, falling to €111.8m for the first half of 2016 from €116.2m for the same period last year.

Government’s capital expenditure also fell over the first half of 2016, totalling €126.3m down by €79.8m. This was mainly the result of lower spending on EU funded projects related to sewerage and agriculture.

Other expenditure savings were also recorded in the external borders fund and the acquisition of property for public purposes.

The net result of these changes to revenue and expenditure has resulted in Malta reporting the second biggest surplus of all European Union member states, and the country was also ranked as having the fourth largest fall in the ratio of debt-to-GDP in the first quarter of this year.

Minister for Finance Professor Edward Scicluna said: “I am pleased to note that Government finances for the first half of this year continue to be in line with projections while outperforming previous years.”

Climbing public debt

While revenue has increased over the period, public debt has also climbed steadily over the first six months of 2016.

At the end of June 2016, Central Government Debt stood at €5,568.3m, up by €183.5m compared to the same period in 2015.

This was the result of higher Malta Government Stocks and Treasury Bills, which increased debt levels by €147.5m and €82.7m respectively. Government debt levels were further increased by lower holdings by the Maltese government in Malta Government Stocks, adding €13.5m.

These increases were partially offset by decreases in Domestic Loans with commercial banks and Foreign Loans, which fell by €56.4m and €10.5m respectively.

Meanwhile, Euro coins issued in the name of the Maltese Treasury increased by €6.7m compared to June 2015, totalling €69.6m.