Seasonality my foot

Maltastar



Min John Dalli should have turned read in the face on publication of the government finance figures for the first five months of 2002. When replying to Labour`s criticism that with a deficit of Lm 68 million accumulated in the first five months the target for the whole year deficit of Lm77 million seems unreachable, Dalli just brushed this aside saying that government`s cash flow suffers from seasonality.` Seasonality my foot, Mr Minister! ` writing off such a deviations on the excuse of seasonality is sheer irresponsibility.`

Nobody disputes that government`s cash flow is more robust in June, August and December than it is in May. But writing off such a deviation on the excuse of seasonality is sheer irresponsibility.

To eliminate the effect of seasonality all that is necessary is to compare the performance in the first months of this year to the performance in the same period in previous years.` This is easily available in published NSO figures and to avoid burdening readers with a lot of figures I just give here the bottom line.

Shortfall in government revenue for the period January to May:

1998:` Lm39 million 1999: 39 million 2000:` ` 31 million 2001:` ` 48 million 2002: 68 million

How can the more than doubling of the deficit in the first five months from 2000 to 2002 be attributed to seasonality` Any serious analyst would tell you that government finance have hit a rock and that the whole structure could implode.`

The graph published by the National Statistics Office with the press release publishing the state of public financing as at May 2002 speaks volumes and is worth reproducing.` It shows that when John Dalli took over as Minister of Finance in Feb. 1992 the state of public finances was in good shape and indeed the shortfall narrowed considerably in 1993 when John Dalli still had things under control.

But as soon as John Dalli was charged to prepare budgets as from 1994 onwards the whole matter of public deficit just spun out of control and is still spinning further out of control till this very day.







The gap is widening.` In spite of steep increase in government revenue which is being extracted through increased burden of taxation as well as efficiency in tax collection (give the devil his due!) the other ministers keep spending much faster than John Dalli can collect.

`The reply he gave points to something beyond gross negligence!`



Having a problem is bad enough.` Negating it while it stares you in the eye is not just irresponsible; it is criminally dangerous.` `The last time the government was in this situation in 1996 it went for an election rather than let the cat out of the bag by preparing a budget for the following year. Surely this experience will be on Prime Minister`s mind during this summer.

On a related matter I had the opportunity last Saturday in a debate programme on Net TV to ask John Dalli face to face a question I have been asking in my writings for which I never got a reply.` I asked him why as a Minister who chose to sell Mid-Med Bank without any bids but in a direct deal with the first interested buyer who walked through the door, why did he include an incredibly steep 6% risk premium in discounting future earnings of the bank. The adoption of such a high risk premium effectively halved the price which should have been paid for the bank by HSBC.

I asked why, a Minister defending our interest, rather than argue that a solid bank like Mid-Med was entirely risk free as it commanded 50% of the market and had a consistent record of profitability, why did he include the 6% risk premium.

Being in such a tight spot John Dalli could muster just one reply. He said he did so because he is a professional and that`s how things are done professionally.

Unbelievable!` I used to hope that this was a case of a bad slip, a genuine mistake amounting to gross negligence. I am starting to change my mind. Because as a professional John Dalli knows that this is not the way things are done professionally.` The reply he gave points to something beyond gross negligence!