The Finance Minister is currently on a roll criticising the Nationalist Party for an arithmetic mistake in their new tax-reeducation estimates, but the Finance Minister should not get all so cocky about his work and his legacy. The Finance Minister has presented totally different financial estimates in just the span of a couple of weeks, with the estimates having changed only due to the Labour Party’s long list of electoral pledges.
This is anything but serious work. Minister of Finances Clyde Caruana can’t evade criticism of outright populism and paying with financial estimates out of electoral convenience. Finance Minister Clyde Caruana may very well be the first ever Finance Minister who spearheaded a fiscal policy of rampant populism. His policy may work, but it may not. Ultimately, it betrays his long-held aura of fiscal responsibility and caution and the Finance Minister is increasing the risks with regard to public finances.
Let’s be very clear what the Finance Minister is doing. He has dropped his fiscal plan of fiscal responsibility in exchange for a programme of subsidies, and effectively, he is removing the so-called “cushion” which may be used for more fuel and electricity subsidies to replace it with a subsidy spending programme. The so-called cushion is being removed as war in the strait of Hormuz rears its ugly head again.
The subsidies are meant to stimulate the economy with their expenditure: economic growth is based on domestic consumption and much of this is being pumped by the government. In order to purse this policy, the Labour government is removing our propensity to build capital projects along with removing the “cushion” that is meant to save us if the world goes through another crisis. It’s going to be incredibly challenging for the Finance Minister to redraw his financial estimates if oil remains hovering above the $90 mark (WTI).
The government is betting that there won’t be another crisis this year and oil will keep going down – this is the mainstream forecast and understanding of the situation as of now, but things may change again and the government is not prepared neither ready for any potential future supply or energy shocks.
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