Government pays €261 million in interest alone to finance its debts
Spending on debt servicing diverts funds from investment, social welfare - Auditor General
Malta has seen a “substantial increase” in the amount of interest it has to pay to finance its debts, with the figure hitting €261 million in 2024.
An audit of public accounts by the Auditor General flagged how the €261 million figure amounts to a 22% or €47.2 million increase compared to the previous year.
By the end of 2024, the amount of outstanding government debt was close to €11 billion, an increase of €736 million when compared to the previous year.
The bulk of that debt (80%) is made up of government bonds issued to the public.
“This substantial increase in debt servicing reduces the availability of public funds for other investments, as resources directed to interest payments could otherwise support initiatives that promote long-term economic growth and social welfare,” the Auditor General said.
High funding requirements due to the COVID-19 pandemic and the war in Ukraine, along with rising borrowing costs, led to these substantially higher interest rates, the Auditor General said.
Around €6.9 billion, or 79% of outstanding government bonds at the end of 2024 are set to be repaid between 2026 and 2034.
While interest rates were kept low by the European Central Bank during the pandemic to keep borrowing costs low, they have since risen.
In 2028, bond repayments approach €1 billion, indicating elevated refinancing needs and interest rate risks during that period, the Auditor General said.
After 2034, the amount of outstanding bonds declines sharply, with smaller and more evenly distributed maturities extending up to 2052.
Despite the rise in borrowing, the percentage of debt to GDP has been declining, indicating that the economy is growing at a faster rate than that of debt.
Finance Minister Clyde Caruana has said he aims to bring the debt-to-GDP ratio down to close to 40%.
European Union rules mandate that this ratio does not exceed 60%.