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Kurt Sansone
A reduction of Lm16.7 million in capital expenditure for the first eight months of the year is the single largest contributor to government’s efforts to maintain the deficit’s downward trend.
The drop in capital expenditure brings into question the sustainability of government’s deficit reduction drive, since this budget item is expected to increase once again next year when Malta foots its share of the bill for EU-financed projects.
With government contemplating a tax cut of Lm8 million and aiming to keep the deficit below the three per cent GDP mark for next year, expenditure cuts would have to come from elsewhere if government is to stay the course of fiscal prudence.
The deficit between January and August stood at Lm69.2 million, a reduction over the Lm91.1 million registered in the same period in 2005. But to maintain the downward trend government has had to cut capital investment as recurrent expenditure increased by Lm13 million, albeit at a slower pace than the previous year.
Between 2004 and 2005, recurrent expenditure increased by Lm20.4 million. In 2006, recurrent expenditure increased by Lm13 million when compared to 2005. On a positive note, the government wage bill has also been kept stable with an increase of less than Lm1 million in 2006 against 2005. Contributions to government entities also registered a positive drop of Lm5 million.
The heftiest increase in expenditure came in the budget item programmes and initiatives which includes social services and education with January-August 2006 seeing an increase of Lm16.7 million over 2005.
On the other hand, recurrent revenue increased by Lm20.6 million for the first eight months of the year when compared to 2005. The increased tax take came primarily from an increase of Lm12.2 million in income tax and Lm7.1 million in national insurance contributions.
Recurrent revenue totalled Lm551 million for the first eight months. The projected revenue for this year is Lm951.5 million.
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