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Malta’s Debt Edges Closer to €10 Billion

Malta's Debt Edges Closer to €10 Billion
by
November 24, 2023
in Finance News, NEWS Malta
341

In a recent announcement by the National Statistics Office (NSO), Malta’s Central Government debt reached €9,680.9 million at the end of October 2023. This marks a substantial increase of €942.9 million compared to the same period in 2022, revealing noteworthy shifts in the nation’s financial landscape.

Understanding the Components of Debt Increase

The NSO report highlights that the surge in debt is primarily attributed to the increment in Malta Government Stocks, amounting to €1,401.2 million. Additionally, Euro coins issued in the name of the Treasury contributed €4.6 million to this rise. However, it’s crucial to note that this escalation was partially offset by reductions in Treasury Bills (€415.5 million) and the 62+ Malta Government Savings Bond (€23.5 million). Interestingly, higher holdings by government funds in Malta Government Stocks led to a decrease in debt by €23.9 million.

Government’s Consolidated Fund: A Closer Look

By the end of October 2023, the Government’s Consolidated Fund reported a deficit of €155.7 million. This deficit, when compared to the same period in 2022, reflects a decrease of €492.7 million. To comprehend the dynamics at play, it’s crucial to dissect the components of the Government’s financial transactions during this timeframe.

Revenue Surge: A Positive Aspect

Between January and October 2023, Recurrent Revenue witnessed a significant uptick, reaching €5,223.4 million—€694.9 million higher than the previous year. Key contributors to this surge include notable increases in Income Tax (€427.8 million), Social Security (€91.2 million), and Grants (€62.4 million). However, some revenue streams experienced declines, such as Miscellaneous Receipts (€36.9 million) and Central Bank of Malta (€22.2 million).

Expenditure Overview

Total expenditure by the end of October 2023 stood at €5,379.0 million, reflecting a €202.2 million increase from the previous year. Delving into Recurrent Expenditure, which totaled €4,659.4 million, an increase of €126.7 million compared to the same period in 2022, unveils insightful details.

Contributions to Government Entities

A significant contributor to the rise in Recurrent Expenditure was a €61.0 million increase in Contributions to Government Entities. Notable recipients included the Malta Tourism Authority (€11.8 million), Resource Support and Services Ltd (€9.3 million), and Environment and Resources Authority (€5.1 million).

Programmes and Initiatives

Conversely, the Programmes and Initiatives category experienced a decline of €37.6 million. This reduction stemmed from lower outlays towards Pandemic assistance schemes (€117.8 million) and EU own resources (€52.9 million). However, increases were noted in Social security benefits (€87.4 million), Medicines and surgical materials (€32.2 million), and Tal-Linja card (€17.0 million).

Public Debt Servicing Costs

The interest component of public debt servicing costs totaled €175.0 million between January and October 2023, signaling an increase of €30.0 million compared to the previous year.

Capital Spending: A Detailed Breakdown

During the same period, the Government’s capital spending amounted to €544.7 million, representing a €45.5 million increase from 2022. This augmentation is attributed to higher expenditures on the REPowerEU initiative (€20.0 million), Property, plant and equipment (€18.2 million), and National Identity Management Systems (€6.6 million).

Analyzing the Deficit

The disparity between total revenue and expenditure resulted in a deficit of €155.7 million in the Government’s Consolidated Fund at the end of October 2023. This deficit, while reflecting an increase in Recurrent Revenue (€694.9 million), is partially offset by rises in Recurrent Expenditure (€126.7 million), Interest (€30.0 million), and Capital Expenditure (€45.5 million).

Frequently Asked Questions (FAQ)

What contributed to the significant increase in Malta’s Central Government debt?
The primary contributors were the rise in Malta Government Stocks and Euro coins issued in the name of the Treasury.

How did government funds impact the reduction in debt despite an overall increase?
Higher holdings by government funds in Malta Government Stocks led to a decrease in debt by €23.9 million.

What sectors experienced the most substantial increases in Recurrent Revenue?
Income Tax, Social Security, and Grants recorded the largest increases, amounting to €427.8 million, €91.2 million, and €62.4 million, respectively.

Which government entities saw significant rises in Contributions during this period?
Notable recipients included the Malta Tourism Authority, Resource Support and Services Ltd, and Environment and Resources Authority.

Why did the Programmes and Initiatives category witness a decline in expenditure?
The decrease was primarily due to lower outlays on Pandemic assistance schemes and EU own resources.

What factors contributed to the increase in public debt servicing costs?
The interest component of public debt servicing costs increased by €30.0 million, reflecting changes in financial dynamics.

Which initiatives drove the higher capital spending by the Government?
Increased spending on the REPowerEU initiative, Property, plant and equipment, and National Identity Management Systems were key contributors.

How did the deficit in the Government’s Consolidated Fund change compared to 2022?
The deficit decreased by €492.7 million, influenced by changes in Recurrent Revenue, Expenditure, Interest, and Capital Expenditure.

What led to the decline in the Programmes and Initiatives category?
Lower outlays on Pandemic assistance schemes and EU own resources were the primary factors contributing to the decline.

How does the October 2023 financial report impact Malta’s overall economic outlook?
While indicating areas of growth, the report also highlights challenges, emphasizing the need for strategic financial management.

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