The 2011 budget, approved by parliament in December, provides for total expenditure of MT132.4bn (US$4.1bn), officially forecast at equivalent to 31.1% of GDP. Current spending, one-half of which is accounted for by public-sector wages, is budgeted at MT68.8bn. This is just over 50% of total spending and forecast at equivalent to 18.3% of GDP. Capital spending of MT60bn (around 16% of GDP) is set to rise by nearly 15% on the latest estimates of executed spending in 2010. Investment in agriculture is budgeted at just MT1.6bn, less than 10% of the MT19bn allocated to capital spending on infrastructure. Education and health, meanwhile, are set to receive MT3.6bn and MT2.3bn in capital spending respectively.

As regards revenue, the domestic component is expected to rise by a brisk 19.5% on the latest estimates for outturn in 2010, to MT73.3bn. The increase is expected to be led by higher income tax receipts, which are projected to rise by 34% on 2010 estimates to MT23.4bn, on the back of rapid economic growth and improved collection. External revenue is budgeted at MT58.1bn (44% of the total). Total revenue is set to rise by nearly 15% on the latest estimates of outturn in 2010. Overall, we expect a fiscal deficit equivalent to 6% of GDP in 2011. We expect foreign aid to stagnate in real terms in 2012, although domestic revenue should continue to pick up strongly on the back of still rapid growth. We expect spending growth to be slower in that year as subsidies are slowly unwound. Consequently, we expect a slightly narrower fiscal deficit in 2012, equivalent to 5% of GDP.