The Malta Fiscal Advisory Council (MFAC) has just released its First Annual Report, which was handed to the Minister for Finance on 29 March 2016 and tabled in Parliament on 11 April 2016 in line with the requirements of the Fiscal Responsibility Act, 2014 (Cap 534).
In his statement, the Chairman of the MFAC made reference to the fact that “the MFAC notes with satisfaction the commitment by the Authorities to the announced fiscal deficit and public debt targets” while reiterating that “the Government is invited to proceed further with fiscal consolidation, in order to attain the country’s Medium Term Objective (MTO) of a balanced budget, in structural terms, by 2019.”
The Report reviews the background which led to the establishment of the MFAC, noting the requirement that as an EU Member State, Malta faced a Country Specific Recommendation to set up an independent fiscal institution. This obligation was formally transposed into Maltese legislation through the Fiscal Responsibility Act of 2014. The Report notes that the statutory mandate of the MFAC is rather broad and indeed is wider than that of a significant number of other EU fiscal councils. In particular, the Act requires that the MFAC endorses both the macroeconomic and fiscal forecasts published by the Ministry for Finance, expresses an opinion on all the reports published by the Ministry for Finance during the course of the year, makes recommendations on the conduct of fiscal policy and on legislative amendments, and assesses compliance with the fiscal rules at EU and national level.
The Report reviews the activities of the MFAC since its formal establishment on 1 January 2015, giving an account of the various meetings which were held with different local and international institutions and the reports which were published. The MFAC published six reports, of which, two reports dealt with the assessment of the macroeconomic forecasts, and another two reports dealt with the assessment of the fiscal projections, which were produced by the Ministry for Finance in April and October of 2015, as part of the requirements of the European Semester. In all cases, the forecasts were deemed to be within the MFAC’s endorseable range.
The Annual Report dedicates a chapter to the various recommendations by the MFAC which were included in its reports to date. The overall objective of these recommendations is to improve the conduct of fiscal policy in Malta and fiscal governance in general. In particular, 12 of these recommendations related to the conduct of fiscal policy, 1 dealt with a proposed new legislation to regulate the granting of government guarantees, 8 focused on the budgetary process and 11 to encourage higher transparency. The MFAC intends to follow up further on these issues in the spirit of open dialogue and collaboration with the various Government entities involved in the budgetary process.
A chapter in the Report is dedicated to fiscal governance, highlighting the importance of a sound rule-based framework to ensure a prudent conduct of fiscal policy necessary to mitigate the risk of a fiscal deficit bias and to foster medium and long term sustainability in public finances. It presents a historical overview of how fiscal governance is being strengthened at EU level, from the time of the signing of the Maastricht Treaty in 1992, up to the latest EU Commission’s decision to set up an Advisory European Fiscal Board in 2016.
Another chapter contained in the Report documents and explains the publicly available information about Malta’s public finances, both with regard to historical data as well as fiscal projections. The MFAC considers that fiscal transparency is important because it allows the general public to evaluate better the conduct of fiscal policy and understand whether any risks to sustainability are likely to build up.
The Annual Report is accompanied by the audited financial statements of the MFAC for its first year of operation, in conformity with the requirements of the Fiscal Responsibility Act of 2014.
The MFAC’s Annual Report 2015, including the financial statements, is available on the MFAC's website www.mfac.gov.mt.