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5 maltatoday | WEDNESDAY • 31 JANUARY 2024 NEWS KURT SANSONE ksansone@mediatoday.com.mt THE International Monetary Fund is recommending Mal- ta phase out energy and fuel subsidies while increasing tar- geted support for vulnerable households. The recommendation is made in the IMF's latest review of the Maltese economy and governance structures released on Tuesday by the Washing- ton-based organisation. The IMF's executive board said energy subsidies placed a substantial burden on the budget and this "limited fiscal space" for supporting produc- tivity-enhancing reforms and blunted incentives for energy saving. The recommendation follows a similar one made by the Eu- ropean Commission last year. Government is subsidising the price of electricity, fuel and LPG gas to the tune of €350 million in a bid to keep prices stable. Government has said it will maintain the subsidies un- til 2026. The IMF also recommended Malta adopt a roadmap for the eventual implementation of the 15% minimum tax for com- panies. Malta last year opted to take the six-year extension allowed by EU regulations be- fore implementing the new corporate tax regime. "Given the EU's adoption of the minimum tax direc- tive (Pillar II), IMF directors underscored the increas- ing urgency of developing a well-structured roadmap for phased implementation of the corporate income tax re- form," the organisation said. It also recommended that the roadmap also include personal income tax reform to make the adjustment "more efficient and less distortionary". The IMF welcomed progress on improving the anti-mon- ey laundering framework but added more efforts are needed to enhance governance and an- ti-corruption frameworks. It also called for more efforts to promote research and in- novation, address skill gaps, accelerate decarbonisation and climate resilience, boost investment in renewables, and strengthen education out- comes — overall and for immi- grant students. The IMF noted Malta's re- silience to external shocks and the strong post-pandemic recovery on the back of fiscal support, a persistent inflow of migrants, a strong recovery in tourism, and robust consumer demand. The IMF is expecting "con- tinued solid growth over the medium term", albeit below pre-pandemic levels. "Directors concurred that raising productivity growth and accelerating the green transition are crucial to en- sure sustainable and inclusive growth over the longer term," the IMF said. They added: "With Malta's economy above potential, and with tight labour markets, el- evated inflationary pressures, and sizeable fiscal deficits, di- rectors stressed the need for accelerating fiscal consolida- tion to support disinflationary efforts and to rebuild fiscal buffers at a faster pace to bol- ster fiscal sustainability." In its macroeconomic analy- sis, the IMF expects the econ- omy in Malta to expand by 6.25% in 2023 and 5% in 2024, among the highest in Europe. Headline and core inflation peaked a year ago, the IMF said, having since decelerated as global inflationary pressures have eased. "Still, inflation is expected to remain persistent and above 2% until late 2025, in part re- flecting tight labour markets and sustained demand pres- sures," the IMF said. The organisation said Malta's Recovery and Resilience Plan will deliver crucial reforms and investments in digitalisation and the green transition. IMF recommends phasing out of energy subsidies In its latest review, the IMF commends Malta's resilience and post-pandemic recovery but recommends replacing energy subsidies with targeted support for vulnerable households "With Malta's economy above potential, and with tight labour markets, elevated inf lationary pressures, and sizeable fiscal deficits, directors stressed the need for accelerating fiscal consolidation to support disinf lationary efforts