The International Monetary Fund has once again called for Malta to phase out its energy subsidy scheme, saying that the scheme “does not help incentivize energy conservation or green transition”.

These comments formed part of the IMF’s 2023 concluding statement, which found that Malta had registered an “impressive” post-pandemic recovery and shown “substantial resistance” to the impacts of the war in Ukraine.

Nevertheless, the ongoing energy subsidies remain a concern in IMF’s eyes, with the government having allocated some €320m towards the subsidies in next year’s budget.

In its latest report, IMF says that the subsidies should be phased out “gradually”, accompanied by a “more progressive” electricity tariff structure.

“A gradual move may ease pressures on consumers but would also delay the benefits of exit while leaving public finances vulnerable to further energy price increases”, the report says.

Previous warnings

This is not the first time that IMF has raised its voice on the issue.

In a similar report published earlier this year,  the IMF had argued that Malta should prepare an exit strategy to wean the country off the subsidies, while protecting vulnerable groups.

Earlier still, IMF mission chief for Malta Kotaro Ishi had told Times of Malta that “the government could ask richer or more wasteful consumers to pay a price that is closer to the import price”, rather than subsidising the costs for all consumers.

Other bodies, including the European Commission have issued similar warnings in the past.

Finance Minister Clyde Caruana has so far refused to buckle under the pressure, arguing that removing the subsidies would have a devastating effect on Maltese businesses and families.

Nonetheless, he has warned that subsidies “cannot last forever”, hinting that the government will look to eventually wind them down over the coming years.