Editorial: The fiscal warning Malta can’t ignore

The devil, as they say, is in the detail. So it is with the latest report from the Malta Fiscal Advisory Council.

We are almost immune to headlines announcing how many millions have been spent and how the Excessive Deficit Procedure will be lifted – while others lambast the high debt and how many millions have been spent.

In the background, however, is the MFAC, which does an unemotional, economic analysis of the situation in Malta – past, present and future – and makes recommendations several times a year.

The aim, as per its mission, is to promote fiscal sustainability: meaning spend wisely and sensibly.

The council’s reports give praise where it is due, but also look at the broad picture, warning about what might change the trajectory.

Some things – like COVID – are unexpected, but the principles for future planning are no different to those that someone would use when balancing a household budget.

To give a generic example, it is all very well and good to go out for dinner at a restaurant every day, but what if the washing machine breaks down? Where would the money be sourced to fix it?

One of the issues that the council has brought up again and again – its annual report lists its main recommendations and how often it has repeated them – was productivity, for example.

A few months ago, drawn from its 2025 annual report, the headline in the Times of Malta was: “Stop inflating non-productive spending”. Recently, the headline from another report highlighted that Malta was missing investment targets by €200 million a year – it succinctly commented that the projected €900m investment expenditure was “relatively ambitious” – and that it might be wise to enhance labour productivity. Bear in mind that labour productivity is projected to grow by only 0.1%, a tenth of the EU average productivity growth of 1.0% of the European Commission’s autumn 2025 forecast.

The long-term implications of low productivity have been highlighted before, with the council warning that the government should be prepared for a ‘rainy day’ – the words used were “should the need arise” – saying that it should refrain from spending more, especially when that spending is on areas that do not help productivity.

The council will not slap the government on its wrist or use dramatic language, but the message it has been trying to convey is nonetheless clear: things may be going well now but if the economy is not being built on solid foundations, if the government does not ensure that there is more going for the island than imported labour and domestic demand, then heaven help us if anything changes, internally or externally, to upset the current balance.

The solution: focus on “policies that enhance the quality, efficiency, and long-term sustainability of public finances”. Don’t spend as if there is no tomorrow.

The latest report, published a week after the election, is hardly aimed at the casual reader – or voter. It is aimed at those who make decisions about the budget. Its findings are well researched by experienced economists, and its reports are as far removed as it is possible to be from the electoral billboards: but their messages are among the most serious assessment of whether the island is doing well today and whether future trends indicate any cracks.

Clyde Caruana has been reappointed finance minister, and it falls to him to reject the wilder electoral promises made, unless money can be found for them without pulling the rug out from under other things the government needs to pay for.

No one wants to stand there a decade from now and say: “I told you so”. We can only hope that Caruana takes heed of this report and the ones that went before it. It is not enough to dazzle voters with numbers; it is what lies behind them that counts.