Brief Overview: The current financial & economic situation in Malta
from the National Statistics Office

Government Finance
January - September 2003

Recurrent revenue during the first nine months totalled Lm496.6 million, and made up 64.4 per cent of this year’s budget forecast. Compared to the same period last year, recurrent revenue decreased by Lm9.0 million, or 1.8 per cent. At the same time, total expenditure amounted to Lm638.6 million, an increase of Lm41.3 million, or 6.9 per cent, over the Lm597.3 million expended in the same period in 2002. Government increased the relative level of expenditure when comparing the 2002 figure with that year’s final outturn (72.9 per cent), and the 2003 amount with this year’s budget estimate (74.4 per cent). The shortfall (structural deficit) between Recurrent Revenue and Total Expenditure (excluding contribution to the Sinking Fund in respect of local and foreign loans and direct repayment of loans) during the period under review amounted to Lm135.8 million, an increase of Lm50.2 million from a shortfall of Lm85.6 million for the same period last year.

Last year, one-off revenues were received from the part-privatisation of the Malta International Airport (Lm21.0 million) and from fees collected through the Investment Registration Scheme (Lm5.9 million). Although these revenues were not repeated in 2003, the following increases for the first nine months of the year were registered: Social Security (+Lm4.7 million), Miscellaneous Receipts (+Lm3.4 million), Consumption Tax (+Lm2.8 million), Rents (+Lm1.1 million), Grants (+Lm0.9 million) and Customs and Excise Duties (+Lm0.8 million). Meanwhile, revenue reductions were recorded from Income Tax (-Lm0.5 million), Licences, Taxes and Fines (-Lm3.1 million), Central Bank of Malta (-Lm0.9 million) and Reimbursements (-Lm1.3 million).

When compared to the same period in 2002, recurrent expenditure, excluding Public Debt Servicing, amounted to Lm499.4 million, from Lm471.0 million expended last year: an increase of Lm28.4 million, or 6.0 per cent. Recurrent expenditure for the period under review made up 73.7 per cent of this year’s budgetary estimates, up from 72.9 per cent of the actual final outturn for last year.

Personal Emoluments to date amounted to Lm146.6 million and made up 74.1 per cent of the budget forecast (Lm197.8 million). Last year’s outlay amounted to Lm147.2 million and accounted for 74.9 per cent of the final outturn (Lm196.5 million). This year’s total includes the normal incremental increases in line with the Civil Service Collective Agreement and the Lm1.75 per week cost of living allowance. However the total for this year excludes the Culture and the Arts and Museums Votes, and the Mount Carmel Hospital Cost Centre, as well as the wages element of the agriculture public/private partnership initiative. These are all appearing under the Contribution to Government Entities Category in 2003.

The Operational and Maintenance Expenditure category increased its outlay by Lm0.2 million, or 0.5 per cent, and amounted to Lm36.2 million, up from last year’s figure of Lm36.0 million. The expenditure on utilities (water, electricity and telephone services) amounted to Lm4.6 million compared to Lm3.6 million in 2002. This increase was in fact offset by lower expenditure under Materials and Supplies amounting to Lm15.9 million in 2003, when compared to Lm16.5 million spent during the same period last year.

The Special Expenditure category this year retained the same level of expenditure as last year (Lm0.4 million).

The expenditure incurred on the Programmes and Initiatives category last year amounted to Lm240.3 million and stood at 71.4 per cent of the final outturn. This year’s outlay of Lm259.6 million represents 72.4 per cent of this year’s budget estimates. The increase, in absolute terms, of Lm19.3 million this year is mainly due to increases in the Electoral Commission activities (+Lm1.5 million), Social Security benefits (+Lm8.5 million), Social Security State Contribution (+Lm1.6 million), Guaranteed Earnings Agreement with Public Transport Association (+Lm0.4 million), streets and roads lighting (+Lm0.5 million), Pensions under the MDD/MSCL Retirement Schemes (+Lm0.8 million), Agriculture Support Schemes (+Lm3.3 million) and the new Public Private Partnership (Lm2.9 million).

The outlay on the Contributions to Government Entities category this year increased by Lm9.4 million, or 20.0 per cent and amounted to Lm56.6 million, up from last year’s figure of Lm47.2 million. This increase mainly resulted from the creation of new Government Entities, the expenditure for which in 2002 was incurred under the respective expenditure category as they functioned as government departments at the time, including Heritage Malta (Lm0.6 million), Malta Council for Culture and the Arts (Lm0.5 million) and Mount Carmel Hospital (Lm4.9 million). Furthermore, more funds were passed on to the Malta Drydocks in respect of its operations (+Lm2.7 million) and to the Malta Environment and Planning Authority (+Lm1.0 million).

The interest portion of public debt-servicing costs this year decreased by Lm0.4 million or 0.8 per cent, from Lm49.2 million last year to Lm48.8 million this year.

Capital expenditure during the period under review increased by Lm13.2 million, or 18.6 per cent and amounted to Lm84.2 million. Higher expenditure was incurred this year due to a general increase in capital works carried out in health (+Lm11.9 million) and education (+Lm1.5 million), resources and infrastructure (+Lm1.6 million) and agriculture sectors (+Lm0.9 million). Lower expenditure was incurred under the economic services sector (-Lm5.2 million) due to the voluntary retirement schemes for shipyards, which was not repeated this year. Within this category, the capital outlay on the Mater Dei Hospital for the first nine months amounted to Lm27.3 million; up from Lm12.1 million expended in the project during the same period last year.

Provisional statistics supplied by the Central Bank of Malta indicate that Government Debt outstanding at the end of September stood at Lm1,209.0 million; up by Lm166.4 million, or 16.0 per cent, from Lm1,042.7 million outstanding at the end of September last year. Treasury Bills and Malta Government stock accounted for Lm251.0 million or 20.7 per cent, and Lm883.0 million or 73.0 per cent respectively. The remaining share of Lm75.1 million or 6.2 per cent was made up of foreign borrowing. At the end of September, Government debt was Lm132.1 million higher when compared with the end of last year. Compared to one month earlier, Government debt increased by Lm7.9 million.