Harry Potter and the Chamber of Secrets

Maltastar   
 

Reading the Public Finance statistics published by the NSO for the 10 months to October 2002 and hearing the Minister of Finance reciting his budget speech cannot but bring to mind the latest hit in the box office – Harry Potter and the Chamber of Secrets.

The accompanying Table shows that the deficit for the 10 months in question, after adjusting for the Lm21 million extraordinary revenue from MIA is Lm112 million compared to Lm82 million last year and Lm74 million where Labour left it in 1998.

 

 

	January – October
	Lm millions
					1998	1999	2000	2001	2002
	Ordinary Revenue				441	458	499	527	563
	less MIA extraordinary item								-21
	Net ordinary Revenue				441	458	499	527	542	A
	Recurrent Expenditure				413	427	448	485	524
	Public Debt Servicing				45	46	54	57	61
	Capital expenditure				64	72	68	74	76
	Total Expenditure				522	545	570	616	661	B
	less Contribution to Sinking Funds
		and loan repayments
		included in Public Debt Servicing			7	7	7	7	7	C
	Structural Deficit		A-B+C		-74	-80	-64	-82	-112
	Central Government Debt				730	835	896	1,021	1,035

 

 

“Harry Potter waves his magic wand and to ensure that he establishes a benchmark purposely negatively inflated to make him look good in future comparisons, the deficit is transformed into Lm150 million by December 1998”

 

 

This shows a growth of 37% in the structural deficit over last year. That is the reality.

In moves Harry Potter. He assures us that by the end of the year the deficit will in fact be Lm78 million almost exactly as originally projected.

 

 

Strange things came to happen in the last 2 months of the year. In October 1998 the structural deficit according to the NSO was Lm74 million. Harry Potter waves his magic wand and to ensure that he establishes a benchmark purposely negatively inflated to make him look good in future comparisons, the deficit is transformed into Lm150 million by December 1998.

In the year 2002 the magic wand works in a different way. A deficit of Lm112 million by October 2002 is magically squeezed down to Lm78 million in the last 2 months. This means a positive net performance of Lm35 million in the last 2 months including the Lm21 extraordinary revenue from MIA.

In no period of November-December in the last 4 years has the government achieved a positive cash-flow. But waving his magic wand Malta’s Harry Potter brings the figures down wherever he wants them to.

“After the election the reality will knock and just as it knocks to us all as we walk out of the cinema theatre after the film show”

And now to the Chamber of Secrets. Clearly the Minister will only have to give due account of the actual figures when the real figures for December 2002 will be published sometime in April next year. Only then we will be able to truly open the Chamber of Secrets.

Part of the secret has already been uncovered through the special extraordinary revenue engineered through the sale and leaseback of the airport terminal. But where is the rest? We just have to wait to until we explore the inner tunnels of the chamber of secrets.

 

 

For next year the Minister is projecting a deficit of Lm75 million which marginally erodes the deficit projected for the end of this year. What the government has done to balance the books and make up for the extraordinary revenue generated this year that cannot be repeated next year is the inclusion of Lm23 million grants from the EU.

Let’s hope the government will at least achieve 23% of the Lm100 million it had promised for every year in its last year in office. But history does not augur well.

In his budget speech for 1996 delivered on 22nd November 1995 the Minister had projected a deficit of Lm39 million for 1996. Reality, when it was discovered by the incoming Labour government in the last 2 months of 1996, was that the deficit was Lm112 million.

The problem is that real problems of the world do not respond to Harry Potter style solutions. Government is wasting too much energy hiding the problems rather than addressing them. But the government hopes it can keep the Harry Potter show going until the next election through a budget like this. After the election reality will knock, just as it knocks us all as we walk out of the cinema theatre after the film show.