Finance Minister pledges €600 million spend next year to cushion higher energy, food prices

Finance Minister Clyde Caruana says it does not make sense for families and the economy to withdraw energy and food subsidies that are cushioning the impact of higher inflation.

Energy and food subsidies are expected to reach a whopping €608 million next year, equivalent to 3.6% of GDP, the Finance Ministry’s pre-budget document shows.

But without this government support, inflation in Malta will rise above the EU average and contribute to higher poverty levels.

The pre-budget document unveiled on Friday by Finance Minister Clyde Caruana shows that in 2022, government would be spending €472.5 million in energy and food subsidies to cushion the impact of higher prices.

Caruana said it would not make sense to withdraw this support at this stage since it would impact families and the economy hard.
“We will continue supporting families and the economy until the international situation stabilises,” he said, reiterating a pledge not to increase taxes or introduce new ones in the coming budget.

However, the pre-budget document speaks of “targeted” measures to sustain the most vulnerable and Caruana’s pledge to chase every euro in taxes owed to the government.

The minister said afterwards that government will be issuing another cheque to mitigate the impact of inflation but this will be directed towards vulnerable families.

“To those who accused us of issuing cheques on the eve of an election, we will be doing so again by targeting the most vulnerable this time around,” Caruana said during the press conference following the launch.

Caruana said the deficit this year is expected to be 5.8%, within the projections made by the government, despite the hefty energy subsidies. He said the deficit next year will be slightly less amid projections of 4% in economic growth.

The minister said the GDP projection was based on conservative estimates, taking into account the worst possible scenario.

The pre-budget document shows that without energy subsidies the price of diesel would have increased from €1.21 to €1.79, that of petrol from €1.34 to €1.79, and that of household LPG gas from €15 per 12kg to €23.30. The price of electricity would have increased from 13c9 per kWh to 32c.

Without government intervention to ensure stability in the prices of grains and cereals, food inflation would have increased by 1.5 points.