Lower social benefits drive cuts in government expenditure

In January-May 2011, recurrent revenue increased by €131.6 million, while total expenditure registered a decline of €5.8 million, resulting in an improvement in the government deficit when compared to the corresponding period last year.

During the period under review, recurrent revenue stood at €980.8 million, up by 15.5 per cent over last year. Most revenue components registered increases, mainly Value Added Tax (+€39.7 million), Customs and Excise (+€27.5 million), Grants (+€24.8 million) and Social Security (+€20.3 million). Conversely, a reduction in proceeds was recorded from Income Tax (-€3.2 million) and Rents (-€3.0 million).

Total expenditure stood at €1,131.6 million, down by €5.8 million when compared to the first five months last year, as a result of lower outlays on recurrent expenditure and interest payments. Capital expenditure remained at the level recorded last year.

The decline of €4.3 million in recurrent expenditure was driven by lower social security benefits and contributions to government entities, by €13.6 million and €11.6 million respectively. These were partially outweighed by the payments of an administrative fee to Transport Malta of €5.5 million, an increase in public service obligations of €9.4 million, higher expenditure on streets and roads lighting (+€4.6 million) and medicines and surgical materials (+€ 3.4 million).

Capital expenditure was recorded at €109.5 million. The additional €11.0 million transferred to the Treasury Clearance Fund, the added cost on PC Leasing (+€3.9 million) and on the EU Agricultural Fund for Rural Development (+€3.8 million) were outweighed by the completion of the Malta South Sewage Infrastructure, meaning negligible outlay on the latter project this year.

The interest component of the public debt servicing costs for the period under review declined by €2.1 million and reached to €88.0 million.

As illustrated in Table 3, at the end of May, Central Government debt stood at €4,446.1 million, up by €269.8 million, or 6.5 per cent, over the corresponding period last year. This was the result of higher long-term borrowing, which added €507.6 million. On the other hand, short-erm securities and foreign borrowing dropped by €229.6 million and €13.3 million respectively.

The euro coins issued in the name of the Maltese Treasury went up by €3.9 million when compared to the Euro coin stock as at the end of May 2010, and totalled €41.7 million.