Government kick starts process to reduce deficit by end of year

The government is confident and resolute to bring down the deficit to under 3% by the end of this year and to continue with the fiscal consolidation until necessary.

On Wednesday, the European Commission recommended that the Council of Ministers opens an excessive deficit procedure for Malta. It however did not impose any additional measures on the country's budget.

In 2012 Malta recorded a general government deficit of 3.3% of GDP, breaching eurozone rules to keep deficits below the 3% threshold.

However, the government is confident that it will bring down to under 3% as the Maastricht criteria requires. To this effect, a Spending Review Unit has been set up within the Ministry for Finance to assist all ministries in identifying inefficiencies and excessive spending.

In comments to MaltaToday, Prime Minister Joseph Muscat expressed his confidence that with the plan it presented and through other initiatives which will be announced throughout this year, the government will reach its goals.

The Commission 2013 spring forecast projects that the deficit will continue to be above the reference value in 2013 and 2014, respectively at 3.7% and 3.6% of GDP. These budgetary projections are based on current policies, thus incorporating the 2013 budget that was endorsed by Parliament in April 2013.

"Even though the Commission forecasts these deficits, this government will show the target will be met this year. We are capable of doing so," Muscat said.

"Part of this strategy is the spending review where we will cut excessive spending such as reducing emoluments paid to board members."

By way of example, Muscat said the new salary of the Malta Communications Authority chairman was nowhere near the "€100,000 paid to his predecessor", Antonio Ghio.

Ghio however earned less than €3,000 annually as chairman - Muscat may have been referring to Philip Micallef, formerly the MCA's executive chairman. The MCA is also funded by contributions from operators and not from a direct government budget.

According to finance minister Edward Scicluna, the government wanted to avoid the imposition of specific spending cuts to ensure that the growth momentum which the economy is enjoying is not stalled by negative economic shocks or austerity programmes which some other EU member states had to endure.

Scicluna said despite the fiscal situation it inherited, government remained committed to closing 2013 with a deficit below the 3% threshold and is confident that it can achieve this through several initiatives.

"We will be closely monitoring the fiscal situation on a month-by-month basis, and be ready to intervene when and as required. Secondly, a Spending Review Unit has already been set up within the Ministry for Finance, and is assisting each Government Ministry to identify cost savings through the elimination of waste and other inefficiencies, as well as facilitating the exchange of good practices and incentives to ensure that the country's revenues are enhanced," Scicluna said.

The government is also re-evaluating the budgetary process to ensure that government's functions are achieved in the most efficient manner.

Expenditures must respect the fiscal framework set by the government and be integrated in a holistic manner. We are also committed to addressing the issues as set out in the Country Specific Recommendations made by the Commission, and which will be brought for the approval of the Council in the near future," he said.

Scicluna argued that these measures were in line government's commitment to working towards enhancing Malta's economic growth potential while maintaining responsible fiscal governance.

"This is the approach we pledged before the election, and this is the approach we remain committed to live up to," the finance minister said.