Cabinet expected to approve expenditure cuts of Lm10 million tomorrow

The Cabinet is tomorrow expected to approve public expenditure cuts worth Lm10 million, government sources have told The Sunday Times. These cuts would ensure that the country's deficit target of Lm94.8 million for 2004 is met.

It is understood that quite a large number of government programmes have been targeted across a wide range of ministries in order to substantially cut the nation's fiscal deficit.

Sources say the proposed cuts show that Prime Minister Lawrence Gonzi, who is also the Minister of Finance, is determined to tackle the country's budget deficit and to place Malta's finances on a sound footing.

It is also believed that while substantial cuts in public expenditure will be made, there will be some approved increases for a number of initiatives. "It is a matter of redeploying resources," a source said.

Tomorrow's Cabinet meeting is expected to give the go-ahead to a three-year plan on expenditure capping. "Furthermore, any over-expenditure in one year will not be brought forward to the following year but will be deducted from that year's budget," the sources said.

The government is also determined to curtail expenditure on the so-called extra budgetary units, which have often been the target of criticism due to a perceived lack of accountability, such as authorities, agencies, foundations and local councils, The Sunday Times has learnt. "The government is going to be aggressive with these entities and they will not be allowed to go over their budget," the sources said.

Welfare, pensions and the health system are expected to be exempt from any cuts as discussions within the Malta Council for Social and Economic Development on the reform of this sector are still ongoing. Furthermore, the government is under pressure to increase its spending on healthcare due to higher costs of imported medicines.

Dr Gonzi has publicly pledged to make the reduction of the country's budget deficit his number one priority. On Wednesday the European Commission issued a report critical of the high budget deficit in six of the new EU member states, including Malta.

Although Malta has not set an official time frame for its entry into the euro, it is expected to join in about four to five years, as long as the country's deficit is reduced to three per cent of GDP from the current level of 9.7 per cent.

The government has also been under pressure from the private sector to reduce its expenditure and not to resort to increased taxation as a means of reducing the deficit.