November 4 was the date established by the current Labour Administration to present its first budget for this legislature. A legislature which is represented by a nine seat majority in parliament reflecting the 36,000 votes the Labour Party scored over and above those scored by the Nationalist Party last March 9, 2013.

A various array of measures have been taken which are not only in tandem with the electoral manifesto but are also intended to stimulate further economic growth. It is envisaged that by the end of the current calendar year the economy would have registered, roughly, a 5% increase. This statistic compares very well with that achieved by our counterparts within the EU bloc, wherein a few are experiencing a shrink in their economies. This is due to the strictly imposed austerity measures they had to implement so as to bring their government finances in order.

In terms of unemployment it is envisaged that roughly 6.4% of the Maltese labour force will still be fetching a job by the end of the year. Again, Malta scores well in this aspect when compared with other EU member states.

Undoubtedly, this does not mean that we can remain complacent, thinking that things will continue to get better. There are still foreign and domestic issues which need to be addressed and measures have to be taken to weather any potential damage they might trigger in the local economy.

The economic survey accompanying the Budget Speech by the Hon Minister Prof Edward Scicluna states in the initial paragraph of the Executive Summary that ‘…global economic conditions remain weak and fragile…’.Indeed, the weekly highly respected Economist newspaper refers to the next EU debt crisis.

The Economist envisages that the EU will now have to deal not with sovereign debt but with the bad loans that some banks have made to individuals (in the form of mortgages) and companies. Although in my field of study we have ‘to tell it as it is’, these bad loans still appear on the balance sheets of these banks. Worse still is the Capital Adequacy Ratio (CAR) these banks disclose. The internationally agreed framework on banking supervision (more commonly known as the Basle Accord) establishes a CAR of at least 8%. According to an IMF report these banks have only a CAR of between 4% - 5%! So not only do they have bad loans on their balance sheets but they do not have adequate capital to cushion those bad loans!

As a consequence some 128 banks will next year have to undergo a more severe ‘asset quality’ test by the European Central Bank to identify the non-performing loans still lying around. Now even though our banking system is very sound and the surrounding legal framework is rigorous, surely, a couple of our larger commercial banks will be caught up in the process.

One significant outstanding debtor of the local commercial banks is the national energy provider ENEMALTA which has an exposure of some EUR800 million. Notwithstanding the letters of comfort issued by government to support those debts, immediate action to address it is on the Labour government’s radar. Cashing in on our good relations with China have already proved to be successful with the EUR200million capital injection. That capital injection will certainly ease not only the repayment of the debt itself but will help reduce the current interest charges ENEMALTA has to account for in its income statement, thereby, improving on the corporation’s bottom line.

Amid the local issues which the current government inherited one way of survival is to market Malta as an ideal place to invest in. Indeed it is doing just that given the highly skilled workforce Malta possesses. Yet again to keep up with the competition by other jurisdictions it is paramount that the country continues to invest in educating its younger generations. A few days ago, the Prime Minister Dr.Joseph Muscat was invited to inaugurate the new MICROSOFT Innovation Centre in Malta. Needless to say it’s because of having vibrant young talent fully equipped with the academic know how thatattracted MICROSOFT to open shop here in Malta. Credit is due to the previous administration for acknowledging the signs of the time where information technology is concerned.

Also, having a healthy economy necessitates good stewardship of all the cash resources the government manages to raise. Cash resources which are applied to those areas where they are needed most. Unfortunately, in this area the previous administration lacked a lot. Not only did it allow excessive uncontrolled expenditure to occur but that no one was held accountable for the wrong doing. Matters have proved worse in certain public entities such as the oil procurement case at ENEMALTA. At one point the then Prime Minister Dr.LawrenceGonzireferred to certain officials as ‘having betrayed the public trust’. From an academic point of view he couldn’t have defined better what bad stewardship entails.

The present Labour Administration is adamant to reduce the government deficit and instil again the notion of saving up for a rainy day by striking a budget surplus in this same legislature. The EU are somewhat sceptical that the government will manage to reduce the budget deficit such that the ratio of the deficit to GDP will be under the required minimum of 3%.

One way of making sure the Labour Administration does achieve that is by attracting a high talented team of CPA warrant holders with a practice certificate in auditing and installing one in each and every ministry. Such an adequately remunerated team of CPAs would be coordinated by another trusted officialhoused under the auspices of the Hon Minister of Finance to coordinate their work and report directly there of any shortcomings.

Just to put things into perspective, the Hon Minister of the Family and Social Solidarity is responsible for some €1.2 billion out of the entire government budget of €3.23 billion. To date there is no competent professional official to support the minister in securing that there is good stewardship within the entire ministry she is responsible for.

So whilst the measures of the academically drafted cum practical budget are implemented the call for ensuring good stewardship still remains. The Labour government has ample time to demonstrate it means business in terms of good stewardship in the remaining six to seven months when the general Maltese public will be called upon to select its six MEPs in May 2014.