Government to borrow €1.7 billion this year

Aqra dan l-artiklu bil-Malti

The Finance Ministry has announced its plans to borrow some €1.7 billion in 2024 to compensate for its massive overspending and recurring deficit.

The constant dependence on loans, despite an economic performance that should point towards a reduction in the deficit rather than its continuance, has become a characteristic of government finances since Robert Abela became prime minister in 2020.

The latest borrowing plan, announced by Finance Minister Clyde Caruana as obliged by law, will continue to increase state debt, which, according to the latest statistics, is close to €10 billion.

While the government will borrow some €500 million through government stocks to redeem old borrowing stocks, which will mature this year, most of the new borrowing – €1 billion – will be used to plug holes in this year’s budget, which is forecasted to add to the island’s growing mountain of debt.

The government said that the rest of the borrowing, some €200 million would be needed for “equity acquisitions” without giving any further details.

Some money will likely go to the new national airline – KM Malta Airways –  which needs fresh funds after its predecessor, Air Malta, folded due to hundreds of millions of euros in losses.

The latest borrowing requirement announcement will increase the island’s debt and deficit levels meaning Malta could be one of the first EU member states to be put under the EU’s surveillance mechanism, better known as the Excessive Deficit Procedure.

After suspending the fiscal discipline mechanism during the COVID-19 pandemic, a new set of rules will come into force this year.

These rules require countries with excessive deficits of more than 3% of GDP, like Malta, to cut their spending and reduce their deficits every year.

While until 2019, Malta was registering a small surplus in its annual budgets, slightly reducing its accumulated debt levels, it has been living well beyond its means since 2020, registering record yearly deficits of over €1 billion a year.