Wednesday, 5 September 2012

Don't they understand plain English?

The opening paragraph in today's Times reporting Moody's sovereign credit report on Malta reads as follows:

Moody's rating agency this evening affirmed Malta's A3 rating and negative outlook. It praised the government for fiscal consolidation, particularly for bringing the deficit below 3% at the end of last year but warned of slippage later this year.
But it seems that the Ministry of Finance don't understand plain and simple English. In their statement following Moody's report they say:

"Such a statement contradicts the Opposition’s repeated statements over the past month where the Opposition Leader and spokespersons branded Malta’s financial position as negative, claiming that it had worsened over the past months. Government’s rebuttals and explanations have now been confirmed by Moody’s independent audit of our country’s finances,"
So I went back to read the full Moody's Press statement just in case the Times had misreported them when saying that Moody's had warned of fiscal slippage later this year.   Moody's in fact stated:

Nevertheless, Moody’s notes the continued presence of significant macroeconomic and fiscal downside risks. Further plans for fiscal consolidation target a deficit of 2.2% of GDP in 2012 and 1.8% in 2013.The consolidation strategy is mostly underpinned by additional revenue raising measures, and appears to be optimistic given the weaker economic environment at home and abroad, additional expenditure related to the restructuring of Air Malta, utility subsidies and the current stage of the political cycle, with the deficit traditionally widening in pre-election periods. Given these factors and a susceptibility to stop-and-go policies, Moody’s believes that there remains a risk of fiscal slippage in 2012.

Should instability due to the euro area debt crisis hamper macroeconomic performance, negative debt dynamics could persist beyond 2013 despite a narrowing of the deficit. Such ongoing dynamics could lead to a significant further deterioration in the sovereign's key credit metrics and as such underpin Moody’s decision to maintain a negative outlook.
Moody's is agreeing with the Opposition's recent criticism that the NSO public finance figures for the first 7 months of 2012 show a deterioration of EUR 95 million on the fiscal deficit for the same period of last year equivalent to 39.9% adverse movement.    Government has assured that it will still meet the end of year targets  through compensatory positive variances in the last 5 months but that remains a gratuitous assertion.  Both Moody's and the Opposition are absolutely right in expressing concern on the fiscal slippage that is happening in 2012, as normally happens in an election year.

So I have to conclude that at the Ministry of Finance they don't understand plain and simple English when they say that Moody's statement contradicts the Opposition’s repeated statements claiming that the fiscal deficit had worsened over the past months and that government’s rebuttals and explanations have now been confirmed by Moody’s independent audit of our country’s finances.

May be they should read NSO Press Release with the July 2012 fiscal figures as per link hereunder.

NSO Release re July 2012 government finance

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