Spending freeze ordered at all Government agencies

Finance Minister Clyde Caruana has ordered government agencies to freeze all their spending until at least the end of the year, return uncommitted funds and halt recruitment except in emergencies, Finance Ministry sources told The Shift.

The sudden clampdown also requires costly projects to be pushed into next year’s budget as Caruana struggles to contain expenditure and meet the government’s deficit target.

Sources close to Caruana told The Shift that agencies have been instructed to surrender money not already committed to projects. Caruana is pressing ministers to enforce the restrictions in full to keep Malta within the deficit target promised in the last budget and meet its commitments to the European Commission.

Caruana refused to answer questions from The Shift.

The Shift is informed that the squeeze will not necessarily end in December.

The sources said Caruana has already warned ministers not to expect larger allocations next year than they received this year.

Although many ministers are resisting, Caruana is also considering changes to some taxes and reductions in subsidies. The sources did not specify which taxes or subsidies could be affected, but the measures may be included in the next budget.

The orders follow reports that Caruana had warned ministers there was little room for further spending and was pushing to withhold additional agency funding and postpone major investments.

They also follow warnings from the Malta Fiscal Advisory Council that expenditure pressures were putting the government’s 2026 deficit forecast at risk.

As previously reported, €296.3 million of the €345.5 million increase in expenditure forecast for the entire year had already materialised in the first quarter – 86% of the planned annual increase.

Most of the government’s funds were spent during the run-up to last May’s elections, with the full approval of Minister Caruana.

The latest tightening also comes days after Malta Chamber president William Spiteri Bailey publicly challenged the government over the difference between its private warnings and public assurances on public finances.

At a pre-budget meeting with Prime Minister Robert Abela, Spiteri Bailey said businesses were being warned about strained finances by the Finance Minister while the public was being told it was “business as usual”.

He contrasted the government’s upbeat presentation of its first 100 days with Caruana’s subsequent warning to social partners about energy costs, deficit pressures and limited room for spending.