Updated | Increase in national debt slows down, but still rising

In their endless tit-for-tat on financial statistics, Labour and the Nationalist Party this week issued two different statements on the state of Malta’s government debt.

While the PN says that debt increased by €220 million over the same quarter in 2013, Labour is happy to point out that the debt for July-September 2014 decreased by €135 million from the previous quarter.

Who to believe?

Shadow finance minister Mario de Marco is right to point out that the comparison has to be made between the same quarters of the different years.

But take a look at the historical data: the 2014 third quarter increase in debt is the third lowest in quarterly debt.

Then again, that’s no silver lining. Labour presided over the largest growths in quarterly debt in 2013, when third quarter debt increased by €508 million, and then in the second quarter of 2014, when it increased by €463 million.

And in comparing third quarter debts from 2009, Labour also has the highest rates of growth.

Malta regularly finances its spending through domestic borrowing, but the challenge is for a government to reduce its spending so that it borrows less, while also paying back that debt.

Malta’s debt grew by €218 million in July-September 2014 over the same period in 2013, when it stood at €5.4 billion. But the government is happy that national debt decreased from €5.75 billion during the second quarter of 2014, to €5.62 billion in this third quarter – by €135 million. Can it sustain this decrease?

Whichever way you look at it, Malta’s national debt is at its highest ever since 2009 when it stood at €3.8 billion. With its dependence on domestic borrowing, Maltese governments amass this debt to finance day-to-day spending and capital projects.

But that debt must also be paid back, and finance minister Edward Scicluna has already said that if he manages to keep recurrent spending low, the government will need to borrow less money, easing the overall debt burden.

The challenge is to see whether this trend continues in the quarters to come. As things stand, Malta’s debt is now down to 71.9% of GDP.

Mario de Marco says that the Labour government is burdening future generations with millions in debt.

“While the government boasts of having knocked off the percentage points, it does not say that the global amount of debt has increased. The percentage point decrease is the result of greater econoic growth, which is not coming from te private sector but from government itself, which in the past 20 months employed over 4,500 in the public sector.”

De Marco points out that overall debt is  that GDP increased by 3% thanks to a statistical revision, and that previous adminstrations’ debt was spent on proper infrastructural projects. “The PN today asks in what has this €220 million of debt been spent? This does not augur well for the country’s future stability... debt reduction has to be sustainable and not through one-time measures.”

In a reaction, the finance ministry accused previous former Nationalist administrations of having amassed a national debt of over €5 billion, of which half was created in the last decade, bringing it up to 73% of gross domestic product.

“The Opposition persists in its negative attitude despite Malta having experienced one of the largest drops in the rate at which debt increased of all 28 member states,” Edward Scicluna said.

“These figures do not yet take into consideration the capital investment from Shanghai Electric Power… a €320 million investment in energy, yet to be reflected in Eurostat publications.”