Malta’s debt interest bill has exploded by over €100 million in five years

Malta, under Finance Minister Clyde Caruana, is now paying nearly €300 million a year just to cover the interest on its national debt, a staggering increase of more than 60% since 2020, The Shift can confirm.

Figures published by the Treasury show that debt servicing costs climbed from around €180 million in 2020 to almost €297 million in 2025.

In simple terms, the country is now spending about €814,000 every single day on interest payments alone, a figure expected to continue rising as Clyde Caruana keeps increasing government borrowing instead of reducing debt while benefiting from a strong cyclical economic performance.

Debt servicing does not reduce the debt itself. It is simply the cost of borrowing.

The sharp rise is the result of two developments that unfolded simultaneously over the past five years.

First, Malta borrowed heavily, with government debt surging from around €6.8 billion in 2020 to more than €11.4 billion by 2025 as public spending expanded rapidly after the pandemic.

Second, interest rates across Europe increased dramatically after 2022.

Malta had previously benefited from years of ultra-cheap borrowing, with government bonds issued at historically low rates. But as old debt matured, the government was forced to refinance it at much higher interest rates.

Finance Minister Clyde Caruana has repeatedly argued that the increase in debt is manageable because Malta’s economy is also growing rapidly. His position is that as long as GDP continues to expand, the country can sustain higher borrowing without entering dangerous territory. Government officials often point to Malta’s debt-to-GDP ratio, currently below the EU’s 60% threshold,  as evidence that the situation remains under control.

However, several economists argue that strong economic growth alone does not erase the burden of rising interest payments. They point out that debt servicing consumes real public money every year, regardless of GDP statistics. Every euro spent on interest is money unavailable for healthcare, education, pensions or infrastructure.

The consequences are now becoming increasingly visible in the public accounts.

Five years ago, Malta was paying roughly half a million euro a day in interest. Today, that figure has jumped by more than €300,000 daily.

Unless borrowing slows or interest rates fall significantly, the bill is likely to keep rising.