In the first seven months this year, the shortfall between recurrent revenue and total expenditure of Central Government amounted to €333.3 million, an increase of €95.1 million compared to the corresponding period in 2011.

The increase in recurrent revenue of €72.4 million was outweighed by a rise in total expenditure of €167.5 million, widening the government deficit. During the period under review, recurrent revenue stood at €1,397.4 million, a rise of 5.5 per cent over last year. The main contributors were Income Tax (+€66.4 million), Miscellaneous Receipts (+€28.7 million), Value Added Tax (+€20.7 million) and Social Security (+€16.9 million).

These were partly offset by a decline in proceeds from Grants (-€44.9 million), Customs and Excise Duties (-€15.8 million) and the Central Bank of Malta (-€6.0 million).

Compared to 2011, total expenditure was recorded at €1,730.7 million, up by 10.7 per cent, as a result of higher outlays on all expenditure components.

Recurrent expenditure increased by €118.7 million. The major increase was recorded in Programmes and Initiatives by €80.4 million, mainly as a result of higher social security benefits (+€29.8 million), medicines and surgical materials (+€12.1 million), social security state contributions (+€5.3 million), which also feature as revenue, and EU own resources (+€5.0 million). Moreover, contributions to church schools and Mater Dei Hospital non-medical equipment both increased by €3.7 million while assistance to help the elderly live independently contributed €3.6 million. Added expenditure was also recorded in Contributions to Government Entities (+€17.3 million), Operational and Maintenance Expenditure (+€11.3 million), and Personal Emoluments (+€9.7 million).
Government’s Capital Expenditure for the period under review amounted to €182 million.

When compared to the corresponding period in 2011, the increase of €42.4 million was mainly triggered by an equity injection of €20.0 million to the national air carrier and an increase of €11.2 million in EU funds related to the Ministry for Infrastructure, Transport and Communication, which included works on Roads Infrastructure. Concurrently, higher outlays were recorded in the ICT core services agreement (+€6.0 million), EU funds related to the Office of the Prime Minister (+€3.8 million), the Ministry for Resources and Rural Affairs (+€3.6 million) and higher investment incentives (+€2.7 million). These were partially offset by a reduction of €5.0 million in the contribution towards the Treasury Clearance Fund.

During January-July 2012, the interest component of the public debt servicing costs recorded an increase of €6.4 million. At at the end of July, Central Government debt stood at €4,816.8 million, up by €391.7 million, or 8.9 per cent, over the corresponding period last year. This increase was the result of higher long-term borrowing, which added €505.0 million. On the other hand, short-term securities and foreign borrowing declined by €50.8 million and €12.6 million respectively. Moreover, as a result of consolidation, higher holdings by government funds in MGSs resulted in a reduction of €54.2 million. The euro coins issued in the name of the Maltese Treasury went up by €4.4 million when compared to the coin stock as at the end of July 2011, and totalled €48.2 million.

In a reaction, Labour said that Government needed to explain whether it still held its original fiscal targets as achievable.

"The CBM is warning government that additional fiscal measures may be needed to ensure that the deficit target for 2012 is achieved after taking into account the government's growing fiscal deficit in the first three months of the year to 3.3% of GDP, as it mentions in its own report, and a downward revision to economic growth."

"Apart from its negative performance in public finances during the first three months, government continued to perform badly throughout the first half of the year with public finance showing a further significant deterioration and with the deficit on the consolidated fund growing by €94m. This has apparently not featured in the CBM's analysis and recommendations to government."

"The latest CBM quarterly review claims a cut-off date of 24 May for the input of information, and therefore did not incorporate information on public finances for up to June 2012. It is therefore very odd the CBM takes practically three months between the cut-off date of its analysis and its publication, thus making its analysis less credible as it has been already overtaken by new information. With regards to Government debt, the finance minister had attributed the jump in public debt from 72% in December 2011 to 75% of GDP by March 2012 to Malta's loans through the EFSF. This is completely inaccurate and unacceptable because already in the Budget presented in November 2011, it had already been anticipated that such loans would increase from almost €16 to €45m."

"Besides, the increase of about €39m in loans to the EFSF in the first quarter of 2012, amounts to only about 20% of the rise of the 3% increase in the debt-to-GDP ratio in March. In its debt analysis, the CBM is projecting goverment debt to rise from 72% in 2011 to 72.6% of GDP in 2012, as against the government's projections of public debt to fall from 72% in 2011 to 70.3% of GDP in 2012."

"Clearly a long awaited explanation is warranted from Government whether it still holds its original debt targets as achievable or not," PL concluded.