New government borrowing could cost taxpayers up to €22.5 million a year in interest

Taxpayers could face an annual interest bill of up to €22.5 million from Malta’s latest government stock issue, as Finance Minister Clyde Caruana faces mounting pressure to contain spending and meet deficit targets.

The government plans to borrow €300 million in stocks, potentially increasing to €500 million.

Investors are offered 4.30% annually on stock maturing in 2037 and 4.50% on stock maturing in 2041.

The issue follows Caruana’s warning to ministers that money for further spending was running out if Malta was to meet its deficit targets.  Finance Ministry sources said he was pushing to withhold additional funding to government agencies and postpone major investments until next year.

Government cash expenditure rose by 17.5% during the first half of 2026. The Malta Fiscal Advisory Council warned that the deficit could exceed forecasts unless spending growth slowed substantially or revenue surpassed expectations.

Annual interest on the initial €300 million would range from €12.9 million to €13.5 million. At €500 million, it would reach €21.5 million to €22.5 million, depending on the allocation between stocks. An equal split would cost €22 million annually.

The principal must also be repaid at maturity.

The Treasury’s March borrowing plan provided for up to €1.9 billion in issuance this year, including financing an estimated €852 million Consolidated Fund deficit and redeeming €958.5 million in outstanding securities.

Deficits therefore drive part of the borrowing requirement. However, refinancing existing debt means the entire interest bill cannot be treated as additional expenditure.

The new coupons exceed April’s comparable offerings of 3.80% until 2036 and 4.10% until 2041.

For European context, Belgian banking group KBC recorded ten-year government bond yields of 3.50% for Germany, 3.96% for Spain, 4.37% for Italy and 4.47% for France.

Caruana is reportedly in a panic over how he let spending go haywire during the electiral campain and is now fearing that he won’t manage to keep to his pormise to reduce the deficit accoridng to his previous projections.