Malta is expected to have ended last year with a debt hovering around 55 per cent of the GDP and with a deficit that is likely to reach 5.7 or 5.6 per cent, Clyde Caruana told parliament on Wednesday.
This means the deficit will be slightly lower than the 5.8 per cent rate he had announced during October's budget.
During a detailed technical rundown of the country's current state of finances, Caruana told fellow MPs that Malta will not only reach its budget targets this year, but it will likely do better.
And despite the financial hardship brought about by the pandemic and the Ukraine war, Malta will not need to loan money from other countries and by the end of the year will still be better off than it was in 2011, he said, not to mention a sustained record low unemployment rate.
Caruana was speaking a few hours after the European Commission informed all member states that they must gradually rein in their spending next year and row back on energy support measures.
'Rein in on spending', EU Commission tells member states
The EU is normally very stringent on financial policy with member states, prohibiting them from raking up too much debt and deficits.
But when member states began to feel the financial blow brought about by the pandemic and the Ukraine war, the EU instituted what is known as the 'general escape clause', allowing member states to overshoot debt and deficit limits to rescue their economies.
On Wednesday the Commission decided that member states will, by the end of the year, need to move closer to the EU's debt and deficit targets again as it confirmed that the 'general escape clause' will be stopped at the end of 2023.
The rules are known as the EU's Stability and Growth Pact and state that member states must run a deficit of less than three per cent of GDP and keep their debt under 60 per cent of GDP.
The deficit is the difference resulting from the government's income versus expenditure at the end of the year. Governments run a deficit when they spend more money than they take in. Debt, on the other hand, is the total amount of money that the government owes.
Malta's debt is lower than the EU average, thanks to years of surpluses in the past decade, but the deficit is much higher than the EU average due to energy subsidies and pandemic aid.
'Malta on the right track'
But on Wednesday, Caruana told MPs Malta need not worry much.
By the end of last year, debt will hover at around 55 per cent of GDP - well below the EU limit - and the deficit will likely drop from 5.8 per cent to 5.7 or 5.6 per cent, he said. Official figures will be published in a few weeks, at the end of the financial year.
Malta will be slowly inching towards the EU target, however, and although the annual deficit will be significantly higher than the three per cent capping imposed by the EU's stability and growth pact, it should not lead to any conflicts with Brussels as the EU Commission is only expecting member states to reach that target "in the medium term".
"The Commission acknowledged the financial challenges that member states are facing but is urging us to reduce our deficit," Caruana said.
"It also urged governments to come forward with proposals on how they will do that. And I will be able to speak in more detail about that in the future."
Caruana's speech is one of a series of parliamentary sessions that will see MPs approve the budget implementation bill by the end of this month.
(Additional reporting by AFP)