Plans to end the year with a 2.1 per cent deficit were still on “on track” in spite of the fact that by September the government had veered off its projections by €74 million, the Finance Minister said yesterday.

Addressing the last pre-budget meeting of the Malta Council for Economic and Social Development, minister Edward Scicluna said this shortfall arose mainly from the roughly €65 million which Enemalta owed the government in excise duty on fuel.

The remaining €9 million was partly due to the fact that the government had issued the children’s allowance in advance, he said.

Prof. Scicluna reiterated that the Enemalta bill would be settled at the completion of negotiations with a Chinese state-owned energy company seeking to buy a minority stake in Enemalta. Once the deal was done, part of the proceeds would settle this outstanding amount.

For low-income families this year’s 58 cent weekly increase would not be enough

In outlining the government’s financial situation up to the end of September, he said that expenditures exceeded projections by €58 million, of which €23 million was due to salaries for public service employees.

At the same time there was a shortfall of about €16 million in projected revenue. Though there was a significant increase in revenue from income tax, VAT and social security contributions, the overall income fell short of the projected figure due to the excise duties due from Enemalta.

Next year would be a very challenging one, said Prof. Scicluna, as the government would have to address the ailing finances of three major entities. These were Enemalta, Air Malta, which will receive a final injection of €40 million from the government as part of the restructuring plan, and the bus service, which was nationalised at the beginning of the year until a new private operator takes over. He expressed confidence that the government will end next year with a deficit of 1.6 per cent of GDP.

Though he did not reveal any specific measures due to be announced in next Monday’s Budget speech, he confirmed that indirect taxes (such as excise duties) would increase. On the other hand, the reduction in income tax from 29 to 25 per cent would cost the government €20 million.

Regarding the cost-of-living allowance mechanism, he acknowledged that for low-income families this year’s 58 cent weekly increase would not be enough, as they depended solely on this measure for any wage increase. While the mechanism established 24 years ago had worked well, there was an issue in extreme cases when the increase was either minimal or very high.

Prof. Scicluna urged the social partners to hold talks and put forward their ideas on what measures could be taken in such circumstances.