My worst fears

Auditor General Report for 2010 confirms my worst fears

NAO 2010 Report

 Followers of my writings know that I have been critical of the worrisome amount of hidden national debt in the form of commercial bank  loans to public corporations or publicly controlled enterprises that are covered by government guarantee or letters of comfort.

A full breakdown of such loans is only published in the Auditor General Annual Report   The Report for 2010 was published today and here are details of how much better or worse the situation has developed in 2010 compared to 2009.
 Have a look:

Corporation/Enterprises	EUR millions -2009	EUR millions 2010	EUR millions Increase/(Decrease)
Enemalta	449	580	131
Water Services	85	89	4
Malta Freeport	218	212	-6
Malta Industrial Parks	69	76	7
Malta Maritime/Transport	6	5	-1
Malta Property Managem.	9	7	-2
TOTAL	836	969	133

 None of these exposures are included in the national debt or deficit figures.   The argument is that all these Corporations generate their own revenue flows and should in theory be in a position to generate revenues sufficiently to meet their debt obligations without recourse to the guarantee provided by government.

Reality is different.  Anyone who believes that Enemalta and Water Services can repay their loans by raising utility rates or generating internal efficiencies probably also believes in Father Christmas.  Well it’s the season!!   But after Christmas the debts will not go away and government will remain responsible under its  guarantees.

NAO  in fact add a footnote that

Letters of Comfort and Bank Guarantees may translate into dues by Government should the companies call upon the Government to make good for their debts.   

A very important footnote which deserves some headlines before it is too late.