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

Government Finance
January - September 2004

Recurrent revenue during the first nine months of 2004 amounted to Lm538.2 million, and made up 63.8 per cent of this year’s budget forecast. This represents an increase of Lm41.6 million or 8.4 per cent on the same period last year. At the same time, total expenditure1 amounted to Lm648.1 million, an increase of Lm15.7 million over the Lm632.4 million expended last year.

The shortfall (structural deficit) between recurrent revenue and total expenditure1 amounted to Lm109.9 million, compared to a shortfall of Lm135.8 million reported for January – September 2003. Government’s expenditure for the first nine months of the year made up 69.1 per cent of this year’s budgeted expenditure. The expenditure for the comparative period last year made up 74.9 per cent of the actual total expenditure for 2003.

During the period under review, proceeds from the Sinking Fund on Converted Loans amounted to Lm8.9 million, while during the same period last year these proceeds amounted to Lm2.1 million. Contributions to the Sinking Fund amounted to Lm6.3 million, compared to Lm5.7 million for the comparative period in 2003. A total of Lm0.5 million in direct loan repayments were made during the first nine months of 2003, while no such repayments been effected this year. During the period under review, resort to local loans amounted to Lm70.4 million, while no new foreign loans were contracted. The corresponding amounts for 2003 were Lm69.9 million and Lm32.2 million respectively.

Recurrent revenue during the first nine months of 2004 increased by Lm41.6 million, or 8.4 per cent, when compared to the same period last year. This increase was mainly due to higher revenues under Income Tax (+Lm8.9 million), VAT (+Lm11.5 million), Reimbursements (+Lm2.3 million), Dividends on Investment (+Lm1.0), Miscellaneous Receipts (+Lm4.5 million) and EU Grants (Lm13.8 million). A net increase of Lm11.5 million was also registered under Licences, Taxes and Fines, mostly by way of signing-on fees received upon privatising the operations of the lotteries earlier this year. Meanwhile, revenue reductions were reported under Social Security (-Lm1.2 million), Central Bank of Malta (-Lm6.6 million), Rents (-Lm1.7 million), as well as under Customs and Excise Duties (-Lm2.5 million).

When compared to the same period in 2003, recurrent expenditure (excluding Public Debt Servicing) increased by Lm18.8 million or 3.8 per cent, and amounted to Lm518.2 million. Recurrent expenditure for the periods under review make up 70.1 per cent of this year’s budgetary estimates and 73.7 per cent of the final outturn for 2003. Personal emoluments to date amounted to Lm138.9 million, and made up 69.6 per cent of this year’s budget forecast (Lm199.6 million), while last year’s outlay of Lm146.6 million made up 74.8 per cent of the 2003 final outturn. These figures represent a comparative decrease this year of Lm7.7 million, part of which is due to the personal emoluments element of the Drainage Directorate, which is appearing under a different expenditure category in 2004. At the same time this year’s outlay includes increases resulting from the annual increments and the latest Civil Service Collective Agreement. As from this year, all civil service employees, excluding those in local councils, are being paid every four weeks instead of monthly.

The interest component of the public debt servicing costs increased by Lm5.5 million, from Lm48.8 million last year to Lm54.3 million in 2004. This resulted from higher interest payments due on both local stocks (+Lm4.4 million), as well as foreign loans (+Lm1.4 million).

During the first nine months of this year, capital expenditure declined by Lm8.5 million, or 10.2 per cent, and amounted to Lm75.6 million.