The shortfall (structural deficit) between recurrent revenue and total expenditure (excluding contributions to the Sinking Fund in respect of local and foreign loans and direct repayment of loans) amounted to Lm85.8 million, compared to a shortfall of Lm104.6 million reported for January – May 2003.

During the period under review this year no contributions to the sinking fund and no direct loan repayments were effected. However, during the same period last year Lm0.5 million was expended by way of direct loan repayments. Proceeds from local loans this year amounted to Lm46.3 million. No foreign loans were undertaken to date this year. During the same period last year, Lm24.1 million local loans and Lm32.2 million foreign loans were contracted.

The comparative increase of Lm21.6 million in recurrent revenue was mainly brought about by higher revenue under Income Tax (+Lm6.4 million) and VAT (+Lm10 million). A net increase of Lm7.8 million was also registered under Licences, Taxes and Fines, mostly by way of signing-on fees received upon privatising the operations of the lotteries earlier this year. These increases were partially offset by a revenue reduction from the Central Bank of Malta (-Lm6.5 million). Revenue from Social Security contributions was Lm0.6 million higher.

When compared to the first five months of 2003, recurrent expenditure (excluding public debt servicing) increased by Lm11.4 million or four per cent, and amounted to Lm297.7 million.

Recurrent expenditure so far this year made up 40.3 per cent of the budgetary estimates, while recurrent expenditure for the same period last year made up 42.2 per cent of the year’s final outturn.

Personal emoluments to date amounted to Lm76.6 million, and made up 38.4 per cent of the budget forecast (Lm199.6 million), while last year’s outlay of Lm80.8 million made up 41.2 per cent of the 2003 final outturn.

These figures represent a relative decrease this year of Lm4.2 million. This is in part due to the

personal emoluments of the Drainage Directorate, which this year is appearing under a different expenditure category.

At the same time, this year’s outlay includes increases resulting from the annual increments and the latest Civil Service collective agreement.

Expenditure under the Operational and Maintenance Expenditure category amounted to Lm24.8 million.

This total represents a decrease of Lm 0.6 million or 2.3 per cent from Lm25.4 million expended last year. At the same time expenditure registered under the Special Expenditure category amounted to Lm0.3 million, compared to Lm0.2 million expended last year.

Expenditure incurred under the Programmes and Initiatives category this year totalled Lm160.6 million and stood at 38.9 per cent of the budget estimates (Lm413.1 million). Last year’s outlay under this category amounted to Lm145.9 million, and represented 40.6 per cent of the final outturn.

The net increase of Lm14.6 million was mainly due to increases in Social Security benefits (+Lm7.4 million), Compensation Payment by Government as announced in the 2004 Budget Speech (Lm6.6 million), EU Own Resources Contribution (Lm3.1 million), Solid Waste Management Strategy (+Lm1.6 million), interest on ex- MDD/MSCL Loans (Lm1.3 million, appearing under a different category in 2003), and Income Tax Refunds (+Lm1.1 million).

On the other hand, lower expenditure was reported under Electoral Commission Activities (-Lm1.3 million), Street and Roads Lighting (-Lm1.0 million), Charges on ex-Church Property

(-Lm1.0 million), and EU NPAA /Pre-Accession Programmes

(-Lm2.7 million).

The outlay under the Contribution to Government Entities category this year increased by Lm1.4 million, or 4.4 per cent, and amounted to Lm35.4 million, up from last year’s figure of Lm34.0 million. An amount of Lm1.7 million was reported under the Drainage Directorate, while the comparative expenditure in 2003 was included under different expenditure categories. Other reasons for the comparative increase reported under this category were the funds passed to Industrial Projects and Services Ltd (Lm1.2 million), and MCAST (+Lm1.1 million). On the other hand, lower expenditure was registered under the Malta Shipyards item (-Lm3.1 million), which in 2003 featured partly under capital expenditure.

The interest component of the public debt servicing costs this year increased by Lm3.5 million, from Lm28.2 million to Lm31.7 million, mainly due to interest payments on Malta Government stocks borrowed last year.

Capital expenditure during the period under review decreased by Lm12.2 million, or 22.5 per cent and amounted to Lm41.9 million. The lower expenditure was incurred under the sectors of Finance (-Lm1.0 million), Transport and Communications

(-Lm3.0 million), Health (-Lm5.0 million), and Information Technology and Investment

(-Lm2.5 million).

Provisional statistics provided by the Central Bank of Malta

indicate that Central Government debt outstanding at the end of May reached Lm1,337.6 million.

This amount represents an increase of Lm161.7 million, or 13.8 per cent, from Lm1,175.9 million outstanding at the end of May last year.

This year’s total includes Lm41.8 million which are the Government’s assumption of the debts of the ex-Malta Drydocks and of the ex-Malta Shipbuilding.

For consolidation purposes as from this year the Sinking Fund investments in Government debt are being deducted from the total outstanding balance.