Business News 

May 2020 sees Government deficit reach €673 million

26th June 2020

A €142.8 million drop in Income Tax proved to be the main catalyst behind the decline in revenue.

By the end of May 2020, the Government’s Consolidated Fund reported a deficit of €673.4 million, the National Statistics Office (NSO) said in a press release issued on Friday.

Between January and May 2020, recurrent revenue fell by €317.7 million and totalled €1,508.9 million, 17.4 per cent lower than the €1,826.6 million reported in revenue by the end May 2019.

A €142.8 million drop in Income Tax proved to be the main catalyst behind the decline in revenue.

Additional drops were exhibited under Value Added Tax (€70.7 million), Social Security (€48.9 million), Licences, Taxes and Fines (€39.1 million), Customs and Excise Duties (€30.0 million), Grants (€22.8 million), Rents (€6.3 million) and Reimbursements (€4.2 million).

Conversely, higher revenue was witnessed under Miscellaneous Receipts (€30.7 million), Fees of Office (€14.6 million) and Dividends on Investment (€1.8 million).

By the end of May 2020, total expenditure amounted to €2,182.3 million, a 15.2 per cent increase from the corresponding period in 2019. Recurrent expenditure totalled €1,798.4 million, €161.8 million higher than the €1,636.6 million recorded during the first five months of 2019.

The main contributor to this increase was a €111.2 million rise reported under Programmes and Initiatives.

Furthermore, rises in outlay were also registered by Contributions to Government Entities (€51.7 million) and Personal Emoluments (€8.6 million), while Operational and Maintenance Expenses declined by €9.7 million.

Main developments in the Programmes and Initiatives category involved added outlays towards social security benefits (€84.7 million, of which €10 million was spent on COVID-19 social benefits), medicines and surgical materials (€17.9 million), church schools, extension of the school transport network (both €6.9 million), solid waste management strategy (€6.8 million), compensation payments (€4.7 million), public service obligation for public transport (€4.6 million), street lighting and feed-in-tariff (both €4.3 million).

The rise was partially offset by reported drops in the state contribution (€16.9 million, also reported as revenue) and the tax relief measure (€11.5 million). The interest component of the public debt servicing costs totalled €73.7 million, a €2.7 million drop from the same period in 2019. Government’s capital spending amounted to €310.2 million by the end of May, a rise of €129.2 million from 2019, largely due to additional spending towards investment incentives (€105.2 million), which amounted to €123.0 million, including €115.0 million spent in relation to the COVID-19 Wage Supplement.

Further increases were recorded in property, plant and equipment (€16.1 million), the EU agricultural fund for rural development 2014-2020 (€7.9 million), road construction and improvements (€4.5 million), maritime facilities and improvements to museums and historical sites (both €3.5 million).

On the other hand, there was a €9.5 million drop reported under structural funds 2014-2020. The difference between total revenue and expenditure resulted in a deficit of €673.4 million being reported in the Government’s Consolidated Fund by the end of May 2020.

This represented an increase in deficit of €606.0 million when compared to the deficit of €67.4 million witnessed during the same period in 2019. This difference mirrors an increase in total expenditure, consisting of recurrent expenditure (€161.8 million), interest (-€2.7 million) and capital expenditure (€129.2 million), in addition to a drop in recurrent revenue (€317.7 million) (Table 1). Decreases in revenue and increases in expenditure reflect developments related to COVID-19. By the end of May 2020, Central Government debt stood at €6,388.2 million, a €897.5 million rise from May 2019.

Increases reported under Treasury Bills (€484.8 million) and Malta Government Stocks (€419.1 million) were the main reasons for the rise in debt. Euro Coins issued in the name of the Treasury contributed to a higher debt of €4.1 million. In contrast, lower debt was registered under the 62+ Malta Government Savings Bond (€3.0 million) and Foreign Loans (€0.1 million). Higher holdings by government funds in Malta Government Stocks also resulted in a decrease in debt of €7.3 million.

May 2020 sees Government deficit reach €673 million