Malta’s deficit shot up by more than €700 million in the first six months of 2020, as declining revenues coupled with increased spending put the squeeze on the government's balance sheet.
The government’s consolidated fund registered an €895.6 million deficit between January and June. In the same period of 2019, the deficit stood at €156.2 million. The fund had ended that year in surplus.
The consolidated fund is the government's main bank account. The deficit is the difference between expenditure and income.
Last April, the government predicted that it would end 2020 with a deficit of 7.5 per cent of GDP, ending years of successive budget surpluses.
Pressure on government coffers this year, caused by economic impacts of the COVID-19 pandemic, were also reflected in levels of public debt, which rose by almost €900 million during the first six months of 2020.
Income down, spending up
Data provided by the National Statistics Office on Friday showed that revenue was down almost 16 per cent between January and June while government spending shot up by 17 per cent when compared to last year.
The NSO said that by the end of June, recurrent revenue had fallen by €345.2 million and totalled €1,819.3 million. This represented a 15.9% drop in comparison to the €2,164.5 million in revenue reported in the first six months of 2019.
Conversely, government spending was up significantly. Between January and June, total expenditure amounted to €2,715 million, 17 per cent more than in the corresponding period in 2019.
During the period under review, recurrent expenditure totalled €2,235 million, €228.1 million more than the €2,006.9 million reported during the first half of 2019.
Where revenue declined
A €128.2 million drop in income tax revenue weighed heaviest on the government's balance sheet, with other significant declines in Value Added Tax revenue (€86.5 million), social security (€58.6 million), licences, taxes and fines (€54.4 million), customs and excise duties (€35.4 million), grants (€17 million), rents (€8.4 million) and reimbursements (€7.8 million).
Revenues were given a boost by increases in miscellaneous receipts (€32 million), fees of office (€15 million) and dividends on investment (€4 million).
Where spending increased
Spending on programmes and initiatives was up by €111.2 million, with the bulk of that outlay going towards medicines and surgical materials (€43.6 million), social security benefits (€43.3 million) and church schools (€20.8 million).
Around €13.6 million of the increased spending on social security benefits went to finance benefits related to COVID-19.
Contributions to government entities (€77.7 million), operational and maintenance expenses (€26.4 million) and personal emoluments (€12.8 million) also rose.
The government recorded some savings by reduced expenditure on social security state contributions (€26.5 million, also reported as revenue) and EU own resources (€9.7 million).
Debt and capital spending
Capital spending rose during the first six months, reaching €386.9 million, in large part due to €154 million spent on a wage supplement for workers whose jobs were affected by the COVID-19 pandemic.
There were drops in income from EU structural funds (€13.1 million) and cohesion funds (€12.7 million).
Government debt stood at €6.37 billion by the end of June – an €895 million increase from June 2019. Most of that increased debt came from treasury bills (€522.2 million) and Malta government stocks (€379.9 million).
Euro coins issued in the name of the Treasury contributed to a higher debt of €3.6 million.
Lower debt was registered under the 62+ Malta Government Savings Bond (€2.9 million) and Foreign Loans (€0.1 million). Higher holdings by government funds in Malta government stocks also resulted in a decrease in debt of €7 million.
Malta spent €93.1 million to service interest on that debt in the first six months of the year – a €1.1 million drop from the same period in 2019.