(Adds government statement)

Malta's national debt increased by half a billion euros in the first two years of the present government, the shadow minister on finance, Mario de Marco observed today.

He said the national debt had increased from €4.9 billion in 2012 to €5.4 billion in 2014.

However, in a statement this evening (see below), the government said that contrary to the Opposition's claims, official statistics from the Eurostat database indicated that, while at the end of March 2013 the national debt stood at €5,172.2 million or 71 per cent of GDP, at the end of December 2014 it stood at €5,417.5 million or 68 per cent of GDP.

This meant that, in terms of the share of GDP, the burden of the national debt fell by three per cent of GDP.

Dr de Marco said in percentages terms between 2011 and 2012, the last full year of the Nationalist administration, national debt increased by 1.3%. Between 2013 and 2014, the first full year of the Labour administration, national debt increased by 3.4%.

He said this increase in debt was not being generated by a corresponding investment in the country's infrastructure. It was mainly being driven by increase in the government's recurrent expenditure. 

"The cost of the public sector pay roll, for instance, is set to increase by €127 million over a two year period. This is due to government’s decision to increase the public sector headcount by more than 4,500 people. The expenditure of public sector entities has likewise shot up without any noticeable difference in the services offered or the level of service offered to the public. A clear example of this is the subsidy for public transport which more trebled without a tangible improvement in the service offered to the commuters."

Dr de Marco said a number of questionable decisions taken by the government, such as the decision to bail out the operators of Cafe’ Premier and the payment meted out to Mark Gaffarena, were helping to push up government’s spending, and therefore the national debt.

"The government seems reassured by the fact that the debt to GDP is improving. The Opposition, while recognising that this ratio has its merits, calls on government to consider the wider picture, particularly the fact that in absolute terms, national debt has continued to increase. This despite the fact that Labour, when in Opposition, promised the very contrary," he said. 

GOVERNMENT STATEMENT

The government said that typically, economists measured the national debt as a proportion of the nation’s output rather than focusing on the absolute amount of debt.

However, even if one went for this kind of analysis, it was hard to understand how the Opposition managed to get the result of half a billion increase in the national debt.

In fact, a subtraction of €5,172.2 million from €5,417.5 million yielded the difference of €245.3 million. This is less than half the amount claimed by the Opposition spokesman.

Instead of focusing on the first two years of this administration, the spokesman might have by mistake calculated the increase in the national debt in the last two years of the previous administration.

In fact, while the national debt stood at €4,551.9 million at the end of March 2011, by the end of March 2013, it had risen to €5,172.2 million. This implied an increase of €620.3 million. This increase is much closer to the half billion euro increase referred to by the Opposition spokesperson.

During the last two years of the previous administration, the national debt rose from 68 per cent of GDP to 72 per cent. This meant that in less than two years, the current administration reversed the increase in the national debt that occurred in the last two years of the previous administration.

More importantly, the European Commission and the rating agencies were projecting that, by the end of this administration, all the increase in the debt burden seen between March 2008 and March 2013 would be reversed.

As for the Opposition’s argument that there was no investment in the country’s infrastructure, this was also belied by official Eurostat statistics. These indicated that, from the end of March 2013 till the end of last December, the government spent €457.8 million in gross capital formation (or investment). This was 24 per cent higher than the spending made in the same period under the previous administration.

The current administration remained committed to reducing the burden of the national debt through an investment-driven growth policy.