By end 2020, Government records deficit of €1.5bn, sees income tax revenue decline by €229m

By the end of 2020, the Government’s Consolidated Fund reported a defi it of €1,467.9 million, the National Statistics Office (NSO) reported on Tuesday.

Revenue

In 2020, Recurrent Revenue amounted to €4,389.3 million, 11.7 per cent lower than the €4,972.9 million reported a year earlier.

Income Tax recorded the largest decrease of €229.1 million. Additional drops were also witnessed under Value Added Tax (€177.1 million), Licences, Taxes and Fines (€86.7 million), Grants (€73.9 million), Customs and Excise Duties (€67.7 million), Reimbursements (€14.5 million), Dividends on Investment (€6.6 million), Rents (€0.8 million) and Interest on loans made by Government (€0.1 million).

The drop in revenue was marginally offset by increases reported under Fees of Office (€32.1 million), Miscellaneous Receipts (€20.1 million), Social Security (€17.3 million) and Central Bank of Malta (€3.5 million).

Expenditure

During 2020, total expenditure stood at €5,857.2 million, 18.0 per cent higher than the previous year.

In 2020, Recurrent Expenditure totalled €4,638.9 million, a rise of €422.7 million in comparison to the €4,216.2 million reported in 2019.

The main contributor to this increase was a €276.4 million rise recorded under Programmes and Initiatives.

Furthermore, increases were also witnessed under Contributions to Government Entities (€88.9 million), Operational and Maintenance Expenses (€38.4 million) and Personal Emoluments (€19.0 million).

The main developments in the Programmes and Initiatives category involved added outlays towards Social security benefits (€79.0 million, of which €14.5 million were spent on COVID-19 social benefits), Medicines and surgical materials (€49.2 million), the Economic regeneration voucher scheme (€45.3 million), Housing programmes (€15.8 million), Feed-in-tariff (€15.0 million), Extension of the school transport network (€9.8 million), Cancer treatment (€8.0 million), St Vincent de Paul Residence service contract (€7.8 million), Church schools (€7.5 million), Waiting lists for medical services (€7.1 million), Detention service, Public service obligation for public transport (both €6.9 million), Compensation payments (€5.7 million), Additional street sweeping services and Chief medical officer medicines (both €5.0 million).

In addition, the interest component of public debt servicing costs totaled €181.2 million, an €11.1 million drop in comparison to 2019.

Capital Expenditure

By the end of December 2020, Government’s capital spending amounted to €1,037.1 million, €482.1 million higher than 2019, largely due to additional spending towards Investment incentives (€406.7 million).

These incentives amounted to €434.9 million, of which €384.2 million was spent in relation to the COVID-19 Business Assistance Programme.

Furthermore, there were increases reported under Property, plant and equipment (€52.5 million), Road construction/improvements (€11.7 million), Maritime facilities (€10.0 million), Film industry incentives (€8.3 million) and ICT (€7.6 million). In contrast, spending under Contribution towards Treasury clearance fund fell by €19.9 million.

Impact of COVID-19

The difference between total revenue and expenditure resulted in a deficit of €1,467.9 million being reported in the Government’s Consolidated Fund at the end of 2020.

This represented an increase in deficit of €1,477.3 million when compared to the surplus of €9.4 million witnessed during 2019. This difference mirrors an increase in total expenditure, consisting of Recurrent Expenditure (€422.7 million), Interest (-€11.1 million) and Capital Expenditure (€482.1 million), in addition to a drop in Recurrent Revenue (€583.6 million). Decreases in revenue and increases in expenditure reflect developments related to COVID-19, the NSO noted.

At the end of 2020, Central Government debt stood at €6,765.2 million, a €1,437.0 million rise from 2019. Increases reported under Malta Government Stocks (€873.5 million) and Treasury Bills (€344.0 million) were the main contributors to the rise in debt. Foreign Loans registered an increase of €119.9 million, largely reflecting the €120.0 million EU loan from the temporary Support to mitigate Unemployment Risks in an Emergency (SURE) instrument. Higher debt was also reported under the 62+ Malta Government Savings Bond (€90.7 million) and Euro coins issued in the name of the Treasury (€1.2 million).

Finally, lower holdings by government funds in Malta Government Stocks resulted in an increase in debt of €7.9 million.