Government expected to announce deficit at around 3.3%

The Labour government is expected to announce a deficit figure of between 3.2% and 3.3%, MaltaToday has learnt.

Finance Minister Edward Scicluna will be presenting the Budget on Monday while delivering a speech on the government's policy. With the speech delivered by the Leader of the Opposition and the Prime Minister's reply taking place immediately, the Budget debate will take three days. The final vote will take place on Wednesday evening.

In a press briefing held yesterday in preparation for Monday's budget, Prime Minister Joseph Muscat revealed that the government's deficit had surpassed the 3% of gross domestic product, putting paid to claims by the previous administration that it would take the deficit down to 2.3%.

Muscat however added that by the end of year, deficit would be lowered to under 3% in line with the Maastricht Treaty criteria. However this might still open Malta to the risk of an excessive deficit procedure.

But according to the former minister for finance, when putting together all the government revenue including January's VAT and February's income tax, deficit should be close to 2.5% and under 2.7%

When contacted by MaltaToday for a reaction, Fenech was cautious saying that official figures have not yet been released and it was therefore difficult to speak about divergences.

"But what I can say is that up until I was minister, the information I had was that with all government revenue collected, including January's VAT and February's income tax added to the previous year, deficit was close to 2.5% but definitely not over 2.7%," he said.

Speculating over the reasons leading to the spike in deficit, Fenech said it would make a difference if last year's income was not reflected in this year's.

"However, if deficit closes at 3% it would be also mean strong finances... and a small deviation which, as Muscat himself said, is not an alarming situation," he said.

Fenech said that the economy in general was still strong, especially work with Malta enjoying one of the lowest unemployment rates. "The financial situation appears to remain on stable grounds. If there are risks of deficit surpassing the 3%, government must take corrective measures in the budget."

While reiterating that the 2012 financial situation he left was one that closed with a deficit of 2.5%. Fenech added that the government's accounts system was accruals-based meaning that it should include estimates of expenditure which government has not yet paid or revenue not yet received. At the same time, the estimates should not be overestimated.

Fenech added that his indications were that all revenue target were met. He also reminded that during 2012, Enemalta did not pay the €50 million accumulated on duty on fuel.

"I don't know whether government has decided to waive them off. However, if they are paid they would make the difference which would bring deficit down to 2.7%," he said.