Caruana warns ministers cash is running out, spending squeeze looms

Finance Minister Clyde Caruana has warned ministers that money is running out for further spending this year if Malta is to meet its deficit targets, The Shift can reveal.

The warning comes after the Malta Fiscal Advisory Council flagged mounting expenditure pressures and an increased risk that the government will miss its 2026 deficit forecast.

Finance Ministry sources told The Shift that Caruana had warned ministers that austerity measures would be needed this year, including a freeze on additional spending and potentially capital projects, to contain overspending linked to the government’s pre-election spending spree.

The sources added that Caruana is pushing to withhold additional financial disbursements, particularly to government agencies, and postpone all major investments until next year.

The message signals a post-election spending squeeze, with ministries and agencies facing restrictions as the government attempts to bring expenditure back into line with its promises.

The independent fiscal watchdog’s recent assessment provides a stark backdrop.

During the first quarter alone, €296.3 million of the €345.5 million increase in expenditure projected for the entire year had already materialised. That represents 86% of the planned annual increase, leaving little room for further growth.

Meeting the forecast would require expenditure growth to slow to approximately 0.7% over the remaining three quarters. Yet cash expenditure rose 17.5% during the first half, with little sign of a slowdown in the second quarter.

The Council identified pressures across government purchases, employee compensation and social payments, alongside rising investment expenditure. Its findings show that the strain extends well beyond the energy subsidies highlighted by Caruana.

The Finance Minister recently told Malta Today that the expected annual diesel subsidy had climbed from €30 million to around €75 million. He indicated that other spending could face scrutiny as the government maintains stable energy prices.