encompass not only economic well-being, but also a wider concept of the quality of life, to include the
environmental and social aspects.
2. Objectives and key challenges
2.1. Sustainable public finances
Government’s fiscal policy framework remains geared towards the achievement of a sustainable fiscal
stance so as to ensure a stable and sound macroeconomic framework which is conducive to price
stability, sustainable economic growth and employment creation. Indeed, as a result of Government’s
efforts to correct the excessive deficit, Malta’s general Government deficit maintained a downward path
declining below the 3.0 per cent reference value in 2006. Government’s medium-term fiscal plan is based
on the principle of maintaining fiscal consolidation and on the sustainability of public finances in the
long-term. Indeed, in the Budget Speech for 2008, Government reaffirmed its priority to achieve fiscal
consolidation wherein the general Government deficit is projected to fall to 1.6 per cent in 2007 and to
continue to improve thereafter to a budget surplus of 0.9 per cent by 2010.
Government’s fiscal consolidation programme is designed such that, whilst fiscal sustainability is
ensured, a number of fiscal measures are implemented to stimulate further economic activity and
employment as well as social cohesion, thereby contributing to the key goals of the Lisbon Strategy.
Progress in the fiscal consolidation process is ensured through consolidation measures primarily on the
expenditure side such that fiscal consolidation is achieved without undermining the competitiveness of
the economy.
Government’s fiscal consolidation process entails a reduction in the ratio of expenditure to GDP from
around 46 per cent in 2004 to around 44 per cent in 2006, and is expected to continue to decline
thereafter. Government is taking various measures in order to contain public expenditure. These include
undertaking public sector reforms as necessary, such as through the amalgamation of public entities to
avoid duplication, restricting employment in non-essential categories in the public sector and cutting
down on administrative costs without compromising efficiency, reducing bureaucracy, and attacking
abuse. Concurrently, Government is redirecting its public expenditure towards measures that are growth
enhancing and which have the potential to generate jobs, focusing on business promotion, tourism,
education, the labour market and the environment.
Furthermore, in December 2006, Parliament adopted a pension reform, with impacts on both revenue and
expenditure, and which Government considers to be a valid effort to improve the adequacy and long-term
sustainability of the public pension system in Malta. This pension reform together with the reduction of
the debt ratio will contribute to improve the long-term sustainability of public finances.
2.1.1. Public sector reform
Service quality improvement
Following a public sector reform initiated in 1990, in 1999 the Office of the Prime Minister launched an
initiative for the introduction of Quality Service Charters in the Public Service. Charters spell out the
rights of citizens as customers of a public service and specify the quality of service that can be expected.
A department with a Charter commits itself to stated performance targets; typically on waiting times,
quality of product, courtesy and information provided. The service delivery mechanisms are rationalized
so that the cost of the service provided is kept to the absolute minimum possible. Departments that
introduce a Charter publish annual results on their performance against service delivery standards. To
date, there are around 60 chartered departments, including the health and education sectors.