Malta’s national debt soared by a further €266 million in the first two months of the year, to reach a record €8.4 billion by the end of February, new statistics published by the NSO show.

These latest figures show that since Prime Minister Robert Abela was installed as the head of the government, the island’s debt has increased by a staggering €3.1 billion, rocketing from €5.3 billion in January 2020 to €8.4 billion by February 2022.

The new statistics do not yet include the government’s spending during the month of the elections, including the unprecedented decision to distribute more than €70 million in cash to the electorate, which was posted to voters just two weeks before the polls opened. 

Added electoral spending includes the reported recruitment of hundreds more employees to the state payroll, mostly through government agencies and contractors with lucrative contracts servicing the government. Although still unreported in the financial statistics, this is expected to make a hefty impact on the government’s spending on salaries in the coming months, particularly in Gozo.

According to the latest data, by the end of February, Malta’s debt reached €8.4 billion – an increase of €1,2 billion in 12 months, or 17.1%.

During the first two months of this year, government spending continued to outrun revenue, despite an increase in revenue from income tax and VAT indicating a recovery in the economy after the pandemic, with increased economic activity being generated.

At the same time, government costs fell in January and February, as the outlay of money related to the pandemic was tapered down and capital expenditure was reduced to try to lower the rising deficit. Still, the country had to rely on further borrowing to cover its obligations.

Although official data for the 2021 financial year have not yet been released, the government is expected to register a record yearly deficit of over 10 per cent, more than twice that originally projected by Finance Minister Clyde Caruana in his budget speech.

While the rules on debt and deficit levels for EU member states were relaxed for the duration of the coronavirus pandemic, the bloc’s normally stringent regulations on government finances are expected to come back into force soon, putting states that haven’t begun normalising their systems yet at risk of facing deficit procedures from the EU.

An additional concern is the accelerated inflation that’s expected to hit the economy, as well as people’s pockets, in the coming months, with some analysts predicting price rises may increase at record rates.

Robert Abela has pledged there will be no increase in consumer prices of energy and fuel this year. This means the government will need to borrow hundreds of millions of euros in additional loans to subsidize these commodities and keep the price unchanged.