The government will be subsidising up to 2.5% of the interest rates on loans which are taken by businesses in order to keep them going through the current Coronavirus-induced economic situation.
Speaking in a press conference on Thursday, Finance Minister Edward Scicluna and Parliamentary Secretary for Financial Services and the Digital Economy Clayton Bartolo said that this was the latest step in the government’s aid packages to businesses to help them survive the economic shortfall brought about by the outbreak of Covid-19 and to help them kick-start their recovery process once the situation returns to normal.
Bartolo explained that the government had already announced a number of schemes in tandem with banks, noting that the Central Bank of Malta has already issued a moratorium on loans for all those materially affected by Covid-19 and had opened a guarantee scheme through the Malta Development Bank.
The latest measure, Bartolo said will see the government subsiding up to 2.5% of the interest rate of loans taken out by businesses. In each case, the client must pay a minimum of 0.1% of the said interest rate.
This means that if a business receives an interest rate of exactly 2.5% - the government will subsidise 2.4% while the business will pay the remaining 0.1%. If the interest rate is, for instance, 3.5% - hence exceeding the maximum threshold of the subsidy – the government will subsidise 2.5% while the business will pay the remaining 1%.
The subsidy will apply for the first two years from the date that the loan is taken, and Bartolo said that businesses should approach their banks directly to take advantage of such a subsidy. To be eligible, Bartolo added, businesses must also past the bank’s eligibility criteria.
Bartolo later clarified that this scheme will not be open to individuals who wish to take out, for instance, property loans. He noted that the government will be providing help only to those who truly needed it, and not those who wanted to profit from the situation by, for instance, buying property through such schemes.
The list of banks participating in the scheme so far are Bank of Valletta, HSBC, APS, MeDirect, BNF, Lombard Bank, Isolabank, and FCM Bank.
Scicluna meanwhile spoke of the extreme need for such measures in order to keep the economic side of this crisis moving forward. He noted that the economy will be hard hit globally, but cited projections released on Tuesday by the International Monetary Fund in saying that Malta may not be hit has hard as other European countries.
The IMF on Tuesday projected that Malta will experience a drop of 2.8% in its GDP this year compared to a rise of 4.4% in the same GDP in 2019. The economic recovery in 2021 is projected to be symbolised in the form of a 7% rise in GDP in 2021.
Scicluna said that these projections are born out of the fact that Malta has been fairing well economically over the past seven years, and so the IMF have faith in Malta’s government and people to pull through the situation with less damage than others.
He briefly explained the economic stimulus measures which the country had introduced since the crisis began. These include VAT deferrals, guarantees, and a wage supplement where the government contributes up to €800 a month of an employee’s salary in certain sectors.
Asked by this newsroom whether, given that the longer the current situation goes on the more of an economic effect there will be on businesses, the government is planning more measures besides those already announced and whether certain sectors are being considered for the government’s wage supplement scheme, Scicluna emphasised that it is important that the health system continues to cope with the number of cases to the point where a total lockdown of the country will not needed.
He noted that a number of sectors are still running, albeit with disruptions, and that a total lockdown would have a “tremendous effect” on the economy.
Matters then depend on the country’s economic recovery, he said before adding that the government is already planning a strategy for the country’s recovery.
In terms of measures, Scicluna said that there have been other measures such as allowing people who have had to postpone wedding ceremonies to still be eligible for a VAT refund, and for the removal of certain taxes on alcohol producers so that they can shift their production line into producing sanitisers instead.
Asked about how many people had lost their jobs since the crisis began, Scicluna did not provide a number but said that the ministry will soon be publishing this statistic. Scicluna noted that while people had lost their jobs, the IMF has projected that Malta’s rate of unemployment is expected to increase at a much less alarming rate than in other European countries.