Budget 2009

Never before has such a budget created so much doubts about the true state of our public finances. The same can be said for the loss of credibility in any economic or financial projections supplied by the Government. This creates uncertainty which does irreparable damage to both the private financial and real sectors of the economy. These sectors rely crucially on direction and guidance as to the trends the economy may take for the foreseeable future.

Just last Monday morning the Minister of Finance was quoted in an English newspaper throwing doubt on my finding that on a rolling year basis our deficit at the end of September stood at 4.3% of GDP. That same morning a previously embargoed EU report on Malta confirmed that indeed the deficit had exceeded the 3% benchmark and is expected to stand at 3.8% by the end of the year. Just try facing an angry crowd of shareholders in an AGM with such or similar results coming from one’s own doing! Today the energy regulator has yet to make an appearance and let the energy consumers know of its opinion and very transparently announce the details of the new prices of energy.

More deeply is the yet unanswered question of whether the partially unreformed public sector can truly become sustainable. To date there is no shred of evidence that this is the case. What we have had is a series of one-off revenue schemes which have buttressed this impression. But the public debt has yet to go down as a ratio to GDP without the aid of one time privatisations.

We will soon be finding ourselves in the eye of the storm unprepared and confused as to how we should react to this eventuality. Popular pressures to spend are understandably coming from everywhere. Whoever keeps the public kitty is aware that there is very little or no cash to spare. Back to easy borrowing. Then tomorrow we shall see. This culture seems to be ingrained in our festa psyche and should find very few opponents. Expect the Government to reduce the energy tariffs come mid next year irrespective of the price per barrel of crude oil.

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