Reducing Malta's Fiscal Deficit a 'Top Priority' Says Dalli

by Robert Lee, Tax-News.com, London

03 June 2003

Maltese Finance Minster John Dalli has announced that the government intends to reduce the country's budget deficit to below 3 per cent of GDP as the island readies itself for full membership of the European Union and adoption of the euro.

Dalli spoke at the recent Maximising Malta's Competitiveness Potential conference where he outlined the major challenges that faced the jurisdiction in terms of structural reform in order to undergo a smooth transition into the single market.

"The short term challenges relate to the fiscal and external deficits that reflect an economy that has not yet fully implemented the structural changes required for it to live within its own means," Dalli told the conference, continuing: "Another long-term challenge arises from Malta’s ageing population, whereby the domestic welfare system will be put under strain as the ratio of working age population to pension age population drops from the current 3.8 to 2.2 by 2025."

Accordingly, the finance minister explained that the government's highest priority was the containment and reduction of the fiscal deficit. However, noting the effect that a slowing global economy was having on the domestic picture Dalli observed that the country's privatisation plans have had to be reined in somewhat.

Therefore, Mr Dalli concluded that the government's efforts should be channelled into curtailing "current high levels of mandatory expenditure, while on the revenue side, taxation and the social security system should be reformed to provide more incentive to economic activity, resulting in the burden of taxation being alleviated."

Mr Dalli said this will foster a more competitve economy and "engender a win-win scenario from which every member of society will benefit.".

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