Malta on track to balance its books by 2029, Clyde Caruana says

Malta will balance its books by 2029, Clyde Caruana said, with the country likely to record a small budgetary surplus within three years.

Caruana was presenting the government’s financial results for 2025, which showed that government debt had climbed slightly, while the deficit dipping sharply below the EU’s recommended levels.

Malta’s deficit, initially slated to be 3.3% in 2025, had dropped in a “substantial and convincing way”, Caruana said on Wednesday, with deficit levels now at 2.2%.

Had the courts not ordered the State to compensate National Bank shareholders to the tune of €71 million, Malta’s deficit would have been even lower, at 1.9%, Caruana said.

The budget balance reflects the difference between government revenues and expenditures. When spending exceeds revenue, the budget registers a deficit. When revenues are higher than spending, the budget registers a surplus. 

Malta had found itself in hot water over its high deficit levels in recent years, with the European Commission launching an excessive deficit procedure against Malta in 2024.

Malta’s deficit had peaked at 8.7% in 2020, at a time when the government was scrambling to cushion the blow of the COVID-19 pandemic.

Deficit levels dropped gradually ever since then, with Caruana suggesting Malta could be out of the EU’s excessive deficit procedure by the summer, once the EU’s finance ministers take a decision on the matter in July.

Deficit will continue to dip over the coming years, Caruana said, predicting a deficit of 1.6% by the end of this year, shrinking further to 1% in 2027.

From then on, things will take a turn for the better, he suggested.

“We will balance the books or have a small surplus of 0.1% in 2029 and 2030,” Caruana said.

He argued that eliminating the yearly deficit would mark an important step in the country’s economic wellbeing. While a deficit “is there to help people in times of need,” a country needs to grow its fiscal reserves once lean times are over, he said.

'Conservative' estimates

Caruana brushed aside the suggestion that its forecast will be thrown into turmoil by the ongoing global uncertainty, arguing that the government was being “conservative in its estimates”.

While the deficit had shrunk by an average of 1.3 percentage points since 2021, Malta will only have to cut its deficit by 0.6 percentage points each year to reach its targets, Caruana said.

However, he added, the government’s fiscal estimates do not factor in potential spending on a long-promised mass transport project.

National debt

Turning to debt, Caruana said that although Malta’s debt levels had grown since the pandemic, this was a necessary evil.

“If that had not happened, the country’s economy would not be growing today and people would have suffered,” he said.

Nevertheless, Caruana said, the country’s economic growth had far outpaced the growth of its debt, with debt levels now at 46.4%, far below the EU’s recommended levels.

National debt is now close to €11.5 billion, official figures indicate. 

Eurostat data shows that Malta had the tenth-best debt-to-GDP ratio, Caruana outlined. The ratio measures the size of a country's total debt as a percentage of its national Gross Domestic Product. 

Caruana rejected Opposition criticism about Malta’s rising debt, describing PN’s track record of the country’s finances as “horrendous”.

“We spent 15 years above the 60% threshold, from 1999 to 2013, spanning three legislatures, with debt reaching 71% of GDP” Caruana said. “Now, in a decade of pandemics and wars our debt level is dropping”.

Caruana said Malta’s debt levels, like its deficit, will drop over the coming years, dipping to 38.9% by 2030, a level only previously recorded in the mid-1990s.

Malta’s interest payments on its outstanding debts will also be less substantial, Caruana said, with payments stabilising at roughly 1.2% of GDP over the coming years.

Caruana also brushed aside criticism from the government’s financial watchdog, the Malta Fiscal Advisory Council, over what it described as inflated “non-productive spending”.

Describing the council’s views as a valid “technical judgement,” Caruana said the numbers published on Wednesday show how the government had continued to “exceed its financial targets”.