Public debt and debt management in Malta : an appraisal

Abstract

Public debt is a Government's obligation and is sometimes referred to as Government debt. Over the years Government debt has recieved much attention, since both in Malta and in the European countries public debt has drastically increased causing international recessions and financial crisis. Throughout this study an analysis of the yearly annual Revenue and Expenditure figures extracted from the Financial Estimates for every year from 1964 till 2011 shall be analyzed and examined. This strategy shall help to identify trends, policy reforms and propositions that over the years have aided in increasing public debt. A thorough analysis of the figures extracted was carried out identifying particular years that indicated increases in public debt worth investigating. While examining the budget speeches the factors that through the years generated Revenue where Income Tax, Customs and Excise Fees, Government Proceeds resulting from Sales, Rent Received from Government Property, European Union Funds and Net Profits generated by the Central Bank. While the factors that generated Expenditure were the Social Benefits, Health Care, Subsidies granted by the Government to Parastatal Organizations and Capital Projects. Furthermore the Accumulated Deficit or Surplus as per the Consolidated Fund were analyzed as a percentage of the Gross Domestic Product (GDP). This analysis was carried out since the Revenue and Expenditure figures shown in the Consoldiated Fund only indicate the public debt incurred by the Government and does not incorporate the debt generated by public owned entities. This revealed that the correlation between the two factors indicated that when the yearly deficit or surplus percentage to the GDP decreased from year to year, the accumulated debt percentage to GDP increased.