Today is Budget Day. This evening, Finance Minister Tonio Fenech will read out the speech for Budget 2009 and the public will find out what is going to be spent, where it is going to be spent and why it is going to be spent. In the same vein, the government will also be telling us where it is going to get the money from (taxpayers’ pockets of course), how much it will be collecting and why.

The first thing that must be said ties in with the interview carried in today’s edition. The economy needs to keep ticking over against a backdrop of global economic uncertainty.

This newspaper had, last week, pointed out to Mr Fenech that UK premier Gordon Brown had identified public capital projects as being an ideal stimulus and asked whether the same would hold true for Malta, especially bearing in mind the e800 million in funding we have at our disposition. On the day, the minister agreed. In today’s issue, he goes further and tells us that the government will try to stimulate internal demand. One way of doing this is issuing calls for tenders for capital projects. It’s simple, contractor gets the job, Joe gets a job with the contractor, Joe can spend it at Paul's shop and Paul can feed his kids... hunky dory. Or is it? It must also be said that the government really needs to cut capital expenditure where it is not needed and really pinpoint the areas where funds can be allocated and spent well, otherwise it will completely undo what has been achieved.

The government will give some money back to the people with a slight income tax cut, or rearrangement of the bands, but when one takes into account what we will be spending on utilities, it is exponentially in favour of the state coffers – meaning – you will be given a little, but you will pay more back.

The Budget surplus by 2010 will have to be shelved, as was admitted by the Minister and he also acknowledged that the deficit figures will have to be revised. What is positive is that the government tightened the belt a few years back to satisfy Eurozone entry criteria. If Malta had not reduced deficit to levels we see today, then we would have been pushed even more wildly off track by the world’s economic woes. On the other hand, people should bear in mind that while the deficit was being reduced, the country was still incurring debt. To put it simply, it’s a bit like paying off your interest on a credit card. Until you pay all the interest off, your bill gets bigger.

Foreign Direct Investment is going to dry up. The credit crunch has made sure of that; if foreign companies cannot get hold of capital, they will not invest in it, and if they do, it will be in their own countries to shore up operations and to cut out inefficiencies.

One does not suppose that the government can be too harsh, not on the back of the utility tariff hike. What the government must do is create a local business climate where money is pumped in by the state to be taken up in work contracts by the private sector. In other words, the government has given itself the very hard task of being an economic stimulant, something normally left to the free market and, also it must be said, against the grain of its current policy of privatising to allow the free market to expand.

Yet, it must do it. The local market is just as shocked by the world downturn as anywhere else. Confidence is at low ebb and people really do not know what to expect. The government needs to offer encouragement and that is not done by spending money willy-nilly. It is done by directing funding to those areas where growth can be targeted and pulling the reins in where spending is for the sake of it. The country is projecting an economic growth rate of three per cent for the end of next year. One cannot really perceive how this is going to be achieved but we do, as is in the best interest of everyone concerned, hope that it is possible. Growth means jobs, jobs means a good living – that is perhaps the most we can hope for; keeping our economy ticking over. The government must spend – but it must spend well.