Update 2 | Third-quarter debt down by €132 million

National debt has been cut down back into familiar third-quarter territory to reach a level of €386 million as at September 2014.

Debt levels were cut by €132.5 million, the second highest reduction in quarterly debt since 2009. Up until mid-2014, debt was at €518 million.

The debt reduction in the third quarter was also the highest of any third quarter since 2009. The main drivers were a reduction of €98.6 million in short-term debt and €40 million in long-term debt.

In a statement, the government welcomed the data, saying government revenue had increased by €98 million over the third quarter of 2013 when tax cuts this year struck €27 million over regular tax revenue.

Total revenue in the third quarter 2014 stood at €790.4 million, an increase of €98.3 million when compared to the third quarter of 2013.

This was mainly triggered by higher proceeds from taxes on income and wealth (€38.5 million), taxes on production and imports (€34.4 million) and net social contributions (€11.2 million).

Receivables from current transfers, market output and capital transfers also registered increases, as opposed to, property income receivable which decreased by €4.2 million.

PN reaction

In a statement, the Nationalist Party insisted that debt had “exploded by €500 million” in the first 18 months of the Labour administration.

“This worries the PN – the growth of debt sends a negative message on the stability of our country, something that does not sit well with potential investors.

“Once again the biggest contributor to government spending were public sector salaries, a direct result of the government’s policy of handing out jobs, which saw 4,700 employed with the civil service,” shadow finance minister Mario de Marco said.

De Marco also said that more people were being taxed with government-induced increases in car licences, insurance, government service payments, increased licence fees for pools, passport fees, exam fees, and rental fees for constructio machinery.

Components of deficit

Total expenditure in the third quarter amounted to €820.1 million. The largest increases were recorded in compensation of employees (€17.5 million) and current transfers payable (€15.8 million). Added outlays were also recorded in subsidies, gross capital formation and intermediate consumption.

On the contrary, capital transfers payable, social benefits and social transfers in kind and property income payable went down by €2.1 million, €2.0 million and €1.7 million respectively.

During the quarter under review, in relation to financial transactions in assets, currency and deposits registered a decrease of €335.7 million over the previous quarter. In addition, other accounts receivable decreased by €7.4 million. Conversly, long-term loans, equity and investment fund shares, and short-term loans added €2.4 million, €2.3 million and €1.3 million respectively.

With regard to financial transactions in liabilities, the major decrease was recorded in other accounts payable with €207.5 million. Short-term and long-term debt securities went down by €98.7 million and €39.7 million respectively. While long-term loans added €4.6 million and currency and deposits increased by €2.4 million.

Total general government debt outstanding at the end of September advanced by €218.3 million over the comparable period in 2013. General government debt amounted to €5,627.3 million, of which €5,623.4 million related to central government.

The increase in central government debt was underpinned by higher long-term debt securities (Malta Government Stocks) of €311.7 million. Long-term loans went up by €66.8 million, whereas short-term debt securities and short-term loans declined by €114.1 million and €51.2 million respectively.

The euro coins issued in the name of the Treasury, which are considered as a currency liability pertaining to the Central Government, amounted to €59.5 million, a rise of €5.2 million over the euro coin stock recorded at the end of September 2013.

Local government debt went down by €0.1 million and stood at €3.8 million.