Malta’s government debt is projected to hit the €10 billion mark by the end of 2023, according to a fiscal watchdog.

The Fiscal Advisory Council said in a report published this month that the figure amounts to a €1 billion increase over the government’s debt in 2022.

Should the €10 billion projection materialise, this means government debt would have increased by 75.5 per cent since 2019, the council said.

Despite this large increase over a four-year period, the debt-to-GDP ratio is still expected to remain below the 60 per cent EU benchmark.

The council said containing debt growth is particularly important in the context of recent developments, whereby stronger monetary policy tightening is leading to higher borrowing costs.

Clyde Caruana will present the 2024 budget on October 30. Photo: Jonathan Borg

In the report, the council advises that any possible expenditure savings by the government are directed towards reducing the spending deficit.

The council advises that any possible expenditure savings by the government are directed towards reducing the spending deficit

On the inflation front, the council noted how the government’s energy subsidy has maintained Malta’s energy inflation at zero.

However, core inflation in services and processed food in particular has remained persistent.

The council said inflation this year means the cost-of-living allowance (COLA) for 2024 will likely be around €13 weekly.

Last month, the Chamber of Commerce proposed removing taxes on the cost-of-living allowance.

It said that with COLA set to rise by a staggering €13 per week, it is imperative to find ways of improving the purchasing power of lower-income groups while also minimising increases in labour costs.

COLA is paid by employers as part of their salary and is calculated every year on a fixed formula based on the cost of a basket of products and the minimum wage.

The government is expected to collect an extra €25 million in taxes as a result of last year’s COLA increase.