Malta is expected to be officially put under the EU’s fiscal surveillance arm next year as the government’s budget, presented by Finance Minister Clyde Caruana, shows a continued dependence on massive borrowing, increasing already high debt levels.
Known as the Excessive Deficit Procedure (EDP), rules governing the mechanism to maintain the EU’s fiscal discipline among member states were suspended a few years ago to allow more flexibility due to the COVID-19 pandemic.
However, the rules are now expected to be reintroduced next year, with Malta being among the first EU member states to be forced into surveillance.
In his speech on Monday, Caruana avoided mentioning the bad news but did refer to the need for stricter fiscal discipline in the coming years.
According to EU rules, member states’ annual deficit must not exceed 3% of the GDP, while national debt levels must be under 60%.
The government’s latest conservative projections for 2024 show that Malta will, again, register a deficit of almost €1 billion next year, equivalent to 4.5% of the GDP, higher than the allowed EU threshold.
On the debt side, Malta is still playing it safe, although the government plans to increase it, pushing it up to 55.3% in 2024 from the expected 52.8% this year.
Since Robert Abela became Prime Minister, Malta’s deficit and debt levels have reached unprecedented levels, with the government borrowing billions of euros to keep up with its spending.
While Malta’s overall debt has now surpassed the €10 billion mark, it is projected to grow even further next year as the government plans to borrow another billion euros.
As global inflation continues to impact Malta’s finances, the cost to taxpayers to pay back the country’s massive loans will increase further.
For example, in 2024, Caruana expects to pay some €271 million just to cover Malta’s pending loans.
This bill will rise further if the European Central Bank continues increasing interest rates in its incessant attempt to decrease inflation.