Government urged to inject liquidity in the economy

Economist Edward Scicluna said today that the government needed to ensure that there was liquidity in the country to stave off the consequences of a recession which was gripping many economies. He also insisted that the government needed to have better control on public spending.

Speaking at a GRTU national conference, Prof Scicluna said that unless government expenditure was reformed, there was a risk that the government would not be able to control it. Indeed, this was already taking place in areas such as health and tertiary education. Everybody wanted more, whether it was medicines or sophisticated surgery. Prof Scicluna said the country did not have much space within which to manoeuvre, but he warned that letting the deficit shoot up would have consequences in the future. His advice was that the government should direct its assistance to those enterprises, sectors and families which really needed assistance.

Liquidity was like oxygen which needed to be administered immediately and not like some scheme whose benefits were only felt in a year’s time.

If the government or major business delayed their payments, this would negatively affect the economy at a time when liquidity was what was needed.

It was also useless for ECB rates to go down if this was not translated to benefits for consumers. Prof Scicluna also insisted that monopolies needed to be removed and there could not be any sacred cows. Referring to Enemalta, which is a monopoly, Prof Scicluna said that while one could argue whether energy should be subsidised, regulation of the sector was important.

Times of Malta – Tuesday, 16th December 2008

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