Abela increased debt by €3.5 billion as Malta faces new EU deficit procedure

Since taking the helm of the country in January 2020, the administration of Prime Minister Robert Abela has increased the county’s public debt by approximately €3.5 billion – from €5.7 billion to €9.2 billion by the end of last June – the Opposition’s Shadow Finance Minister Jerome Caruana Cilia underscored this afternoon.

And the increase in public debt under the Abela administration appears to be continuing unabated. In the three and a half years of his tenure, debt levels have risen 61.4%. while €756.8 million was added over the last year alone.

This also means that Malta is paying more to service its public debt, which Caruana Cilia said is, when coupled with rises interest rates, amounting to a national bill of €3.85 million per week in interest payments alone.

Caruana Cilia also referred to reports that, from next spring, the EU will cease its relaxation of Excessive Deficit Procedure rules that it allowed for member states to recover from the Covid-19 pandemic.

The Council of the European Union’s recommendation on Malta’s 2023 National Reform Programme published in June warns that the European Commission has indicated it will propose the opening of deficit-based excessive deficit procedures against Malta in spring 2024 on the basis of Malta’s data for 2023.

Last May the Commission published a report on Malta’s budgetary situation since its general government deficit in 2022 exceeded the 3% of GDP threshold. The report concluded that the EU’s deficit criterion was not fulfilled.

The Commission did not propose the opening of excessive deficit procedures against Malta last spring despite the breach but said it would propose doing so next spring.

“Malta should take account of this in the execution of its 2023 budget and in preparing the Draft Budgetary Plan for 2024,” the Council advised.

In its plan delivered to Brussels to keep the economy on an even keel, the government is banking on passport sales and the wrapping up of Air Malta’s redundancy schemes.

In its 2023 Stability Programme, the government said it expects the deficit ratio to decrease to 5% of GDP in 2023 – still far above the 3% limit.

The government has explained the decrease in deficit it is forecasting by saying it is expecting an increase in other revenue streams. One such stream is from the sale of citizenships, which the EU is attempting to force Malta to halt altogether.

It is also banking on the winding down of Air Malta’s restructuring costs, although the government is in frantic discussions with Brussels in a bid to inject yet more state aid into the floundering airline, which has been operating on a wing and a prayer and staving off bankruptcy for years.

As the Council explained in its recommendations, “The government deficit is set to decrease but remains one of the highest in the EU.

“The decrease [in deficit] in 2023 mainly reflects the increase in other revenues, including the proceeds from the country’s investor citizenship and residence schemes while the decrease of the subsidies, including the expected phasing out of the national airline restructuring costs, is partially compensated by an increase of intermediate consumption and gross fixed capital formation.”

In its report, the government made no mention of plans to decrease the size of the public sector, which has become bloated since Robert Abela took office, with jobs for votes having become the order of the day.

“It’s a pity that the people’s money continues to be squandered blindly and that the culture of ‘I don’t care, everyone’s pigging out’” is being paid for with the people’s money,” Caruana Cilia said.

“This is also why, in addition to being the ethical and morally just course of action, Robert Abela and his friends must see that what was stolen from the country is returned to the people.”