Malta’s debt has increased by a staggering €3 billion – equivalent to 54% – over the past two years, according to information published by the National Statistics Office (NSO) on Christmas Eve.
This unprecedented increase in debt was mainly driven by a government spending frenzy, partly to counter the ongoing pandemic, and more worrying, to continue feeding a bulging public sector, including the employment of thousands of employees put on the State payroll.
The latest NSO statistics show that while Malta’s total public debt stood at €5.3 billion until November 2019, before the start of the pandemic, it hit €8.2 billion in November 2021. And there is still a month of spending to be taken into consideration in the final 2021 accounts.
Only in the past 12 months, between November 2020 and November 2021, the country’s debt levels increased by €1.4 billion over another €1.4 billion increase registered the year before.
In just two years, Malta’s finances have come full circle, from a surplus of €8 million in November 2019 to a deficit of €1.2 billion by the end of last month, together with a deficit of another €1.4 billion for 2020.
Country’s finances in freefall
According to the NSO, while the government’s recurrent revenue remained almost the same between November 2019 and November 2021, with a slight increase of €150 million due to increased proceeds from income tax and VAT, expenditure shot up by €1.3 billion over the same period.
While the NSO attributed most of this extraordinary increase in expenditure to the pumping of millions into the economy to keep it afloat, an analysis of the published figures shows that the government continued its spending spree in other non-productive areas, particularly by putting more and more people on the State’s payroll.
By last November, the public payroll hit an astounding €1 billion for the first time ever – an increase of €117 million in wages and personal emoluments over a period of two years.
This must be added to another heavy increase in the government’s contribution to various authorities and State entities, which in 11 months (until last November) reached €636 million, or €153 million more than November 2019.
This is also attributed to an extraordinary increase in additional salaries financed by taxpayers and the waste of funds on extraordinary contracts, such as the lease of new MBR offices at €2 million a year.
The Shift has already reported that the government has this year already spent €1 billion more than its own projections for this year.
For many economists who spoke to The Shift, the current developments in the country’s public finances are way beyond sustainability. Many agree that the situation will be getting worse in the coming months as Robert Abela’s government enters its electoral test with the aim, analysts say, of getting a better result than his predecessor Joseph Muscat, so Abela can claim legitimacy as prime minister.
“There is no way to control this very serious situation without austerity measures. However, due to the current political cycle, this will be left for after the election, possibly through the presentation of the next Budget.”
Malta has now veered significantly from the debt and deficit criteria laid down by the EU for its Member States. While sanctions have been waived for the pandemic, Malta is expected to be first on the list of the EU’s new excessive deficit procedures once the rules kick in again in 2023.