Ministers told to find €200 million in budgetary cuts

Ministers have been told that they must find some €200 million in budgetary cuts across most of the entire government system, in a bid to keep spending in check for the rest of the year.

Most members of the executive have balked at the instruction, which will mean cuts across the system in a bid to counter the necessary state injection to make good for the rise in gas and fuel prices prompted by the war in Ukraine.

A government spending review was already underway to mitigate the impact of energy subsidies on public finances.

Finance ministry civil servants have expressed concern over an instruction that is contradicted by other political decisions for continued subsidies that are not means-tested.

The economy is expected to continue growing although projections have been revised downward and this will yield more income for the government.

Malta registered a deficit of 8% last year, the highest in the EU.

Finance minister Clyde Caruana had set aside €200 million to cushion the impact of rising energy prices when presenting this year’s budget. However, this was before the Russian invasion of Ukraine that has caused energy and food prices to spike.

Enemalta’s fixed price agreement with Electrogas came to an end in April at a time when gas prices are soaring. Additionally, the price of other commodities such as wheat have also shot up, prompting government to support Maltese wheat importers with an outlay of €6 million.

But it is only thanks to the Maltese government’s policy to absorb energy and fuel price shocks that Malta’s inflation remains the lowest in the Eurozone at 6.1%.

Still, the spending cuts reflect anxiety over sustainable finances, a formula that can only be achieved with an economic stimulus or increase in taxation, or even both.