Several planned infrastructural projects which were to be entirely financed by national funds are expected to be frozen as the government attempts to cushion the spiralling cost of energy.
The decision could impact certain planned road upgrades, schools and other projects, top civil servants told Times of Malta.
Large investments like the new ITS project near Smart City and a medical hub in the north of the island, among others, are expected to be put on the “back burner”, along with headline projects announced in the lead-up to the March general election.
The decision will not impact projects which have already started, as well as those which are partially funded by the EU’s Recovery and Resilience Facility and European Regional Development Fund.
Finance Minister Clyde Caruana informed all permanent secretaries of the decision during a meeting last Wednesday.
The move is expected to infuriate certain ministers who were planning and banking on the delivery of certain projects.
When contacted, Caruana said he had no comment to make.
But sources said the message was clear: “No more money can be allocated for projects which are 100% allocated from the national budget. If that doesn’t happen, energy bills for all households would have to go up – significantly.”
For every €1 that is spent on state-funded projects, a €1 will have to be cut from another part of the national budget, they said.
There is no fixed start date for those projects which were meant to be financed by national funds, according to the sources.
“In some cases, the delay could take years.”
This, they said, would save the government “hundreds of millions of euros” which can be redirected towards the energy crisis.
Malta is buying electricity from the European grid for more than five times the price set before the Ukraine war and the COVID-19 pandemic sent prices through the roof.
No more money can be allocated for projects which are 100 per cent allocated from the national budget- sources
While energy bills have skyrocketed across the EU, locally, tariffs have remained unchanged for consumers and businesses, with the government opting to absorb the additional costs.
The government is trying to skim €200 million off its expenditure to create an emergency fund to cover the rising cost of energy across Europe.
Energy Minister Miriam Dalli said that current government subsidies, keeping prices locked at pre-pandemic levels, amount to some €1,700 a year per household.
“One glance at our European neighbours can show you how serious the repercussions of increasing electricity bills can be,” Dalli said.
According to a recent study, Malta currently has the third cheapest electricity prices in Europe.
While the government insists it will continue to subsidise utility bills, the details on how it plans to finance the costly policy have remained scarce.
The decision has stretched public finances, and ministries have been ordered to cut down on administrative costs to mitigate the effect of energy subsidies.
Analysts believe the costs could continue shooting up in 2023. Sources at the state energy provider Enemalta said the subsidies could cost up to €400 million in 2023.
The country’s energy supply is a mix of the interconnector cable and a gas-fired power station in Marsaxlokk.
Malta and Hungary are believed to be the only two EU states which are absorbing the hike in energy and fuel through subsidies. Many countries are struggling to find ways to contain the cost, especially since energy is mainly privately-owned.