Some 80,000 vulnerable people from 37,000 households are to receive an extra cost-of-living adjustment, which will average around €300, in time for Christmas.
The measure, intended to help low-income people cope with the rising cost of living will cost between €10 - €11 million.
Caruana had first announced this mechanism well over a year ago, and there was some expectation that it would be announced during last year’s budget.
Earlier on Monday, he explained to reporters during a pre-budget briefing how the new mechanism announced last year will come into play.
The mechanism addresses all those who are receiving social benefits and who earn less than the average income which stands at €17,796 this year.
Caruana said this mechanism is expected to be retained every year although recipients may change according to their income. He explained how the grant will be based on the declared income and the number of persons in the household.
If global inflation in the last 12 months, is higher than 2 per cent and if the inflation in the last 12 months, in three of the five components considered as basic in the retail price index exceeds the average of the previous five years.
These are: food; accommodation; energy, water, gas and fuel; expenses related to the maintenance of the house and household appliances; and private health care.
He said if these two conditions are met, it triggers the mechanism that adequately compensates those who are hit the most, so that the more a family is in need, the more people live inside a house, and the less the income of that family, the more compensation is given to help.