Updated | PL flags growing national debt, Fenech points to €455 million issue of stocks

Updated with finance minister's reaction.

Labour's shadow minister for finance Karmenu Vella has demanded an explanation from government over the latest deficit figures that shows the shortfall between expenditure and revenue at €333.3 million up to July 201

Vella said that the Central Bank's latest quarterly review attempted to offer policy advice to government on its financial performance, warning that additional fiscal measures may be needed to ensure the deficit target for 2012 was achieved after taking into account the government's growing fiscal deficit in the first three months of the year to 3.3% of GDP, and a downward revision to economic growth.

"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," Vella said.

Vella added that finance minister Tonio Fenech had already attributed the jump in public debt from 72% in December 2011 to 75% of GDP by March 2012 to Malta's loans through the European Financial Stability Facility, which he is claiming is inaccurate and unacceptable.

"Already in the Budget presented in November 2011, it had already been anticipated that such loans would increase from almost €16 million to €45 million.

"Besides, the increase of about €39 million 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 government 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."

Malta's structural deficit has reached an unprecedented €333.3 million in the first seven months of this year, €95.1 million more over the first seven months of 2011.

Official data released today by the National Statistics Office showed that the increase in recurrent revenue of €72.4 million was outweighed by a sharp rise in total expenditure of €167.5 million. This widened the government deficit by €333.3 million.

At the end of July 2012, central government debt stood at €4.8 billion, up by €391.7 million over the corresponding period last year. The National Statistics Office attributed this increase to higher long-term borrowing, which added €505 million.

On the other hand, short-term securities and foreign borrowing declined by €50.8 million and €12.6 million respectively. As a result of consolidation, higher holdings by government funds in Malta Government Stocks 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, finance minister Tonio Fenech insisted Malta's economy was healthy and offered peace of mind to businesspeople and investors for the creation of more jobs.

"The proof is in our economic direction which saw foreign investors and local entrepreneurs creating 20,000 jobs in the last four years. This is the best guarantee for a better quality of life," Fenech said.

The minister accused the Opposition of misinterpreting financial data, insisting that the first half of 2012 saw an increase in national debt due to the issuance of €455 million in government stocks, or 65% of the total earmarked for the year, which cannot exceed €700 million this year.

"As the Central Bank review remarks, the quarterly statistics do not necessarily show a trend. In the first quarter of the year, government expenditure reflected aid to Enemalta and Air Malta, in the first case by absorbing oil price increases that were not passed on to consumers.

"We're committed to our financial targets, irrespectively of the doubts the Opposition keeps floating about, and this has been confirmed by the European Commission and the IMF in various reports they have published on our economic state," Fenech said.