Issue link: https://maltatoday.uberflip.com/i/1406636
9 EDITORIAL BusinessToday is published every Thursday. The newspaper is a MediaToday publication and is distributed to all leading stationers, business and financial institutions and banks. MANAGING EDITOR: SAVIOUR BALZAN EDITOR: PAUL COCKS BusinessToday, MediaToday, Vjal ir-Rihan, San Gwann SGN9016, Malta Newsroom email: bt@mediatoday.com.mt Advertising: afarrugia@mediatoday.com.mt Telephone: 00356 21 382741 W ith an election, due at the very latest by September next year, the budget Clyde Caruana will deliver on 11 October will be this administration's last. e Finance Minister faces the daunting task of balancing the need to provide a fiscal stimulus to boost eco- nomic recovery in a post-COVID sce- nario and resisting the election urge to splurge the cash. Public finances recorded a massive deficit last year and the same will hap- pen this year as a result of the COV- ID-19 pandemic. e extraordinary government spending, coupled with a loss of in- come as a direct result of the economic slowdown and deferred tax payments, contributed to the deficit. As a result, government borrowing has also shot up. e advantage Malta has is that its debt-to-GDP ratio was approaching 40% just before the pandemic hit. is gave the government enough breath- ing space to run up two extraordinary deficits, while the debt ratio this year is still expected to remain below 70%. is is the backdrop for Caruana's balancing act, which becomes more complicated in the run-up to a general election when government faces de- mand for more spending from various quarters. e time for uncontrolled public spending must gradually come to a close so that government can steady the ship and bring down the deficit over the next few years. Returning to a surplus must be the fi- nal aim and a plan is needed to achieve this in a sustainable way that does not shock the economy. A rapid withdrawal of government spending at this stage is not salutary. e economy, or at least parts of it, is still in recovery mode and there is still a lot of uncertainty internationally as a result of the pandemic's uneven devel- opment across the globe. But the Finance Minister must en- sure that any government aid, meas- ures and schemes targeted at the pro- ductive sectors have specific outcomes to encourage growth, employment and innovation. Support measures in some areas may be tapered off so that money can be re- directed to other sectors. e government must also restate its commitment to invest €400 million in the improvement of industrial estates to create modern and new spaces for manufacturing industries. Other measures must be aimed at encouraging women and elderly peo- ple to join the labour market, while providing social buffers for those who cannot do otherwise. e minister must also consid- er some form of tax reprieve for the middleclass to boost spending power. Short of a change in income tax, the minister could increase the amount of tax refunds to all those in employment as part of its ongoing electoral pledge. However, Caruana must also take a long hard look at discretionary spend- ing in all ministries and public author- ities to cut out unnecessary expendi- ture. He should also freeze employment with the public sector apart from crit- ical sectors such as education, health and the forces of law and order. e re- cent recruitment call for hairdressers by the Gozo Ministry is beyond belief. e latter two proposals will not be popular on the eve of an election when ministers are inundated with requests for favours but are necessary to keep expenditure under control. Caruana must use his economic thinking hat to chart out a five-year course over which the economy is en- couraged back to growth, while the deficit is reined in. The last Budget 2.9.2021