Contingent liabilities ‘remain a source of vulnerability’

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DBRS Ratings Limited has confirmed Malta’s Long-Term Foreign and Local Currency – Issuer Ratings at A and its Short-Term Foreign and Local Currency – Issuer Ratings at R-1 (low). The trend on the ratings has been changed to Positive.

The rating follows Fitch’s upgrading, earlier this month, of Malta’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) from ‘A’ to ‘A+’ to ‘A+’, with stable outlooks.

DBRS said on Friday that its rating is supported by Malta’s eurozone membership, its solid external position, a favourable public debt structure, and the robust financial position of households.

It warned, however, that Malta’s contingent liabilities remain a source of vulnerability, its economy is exposed to external shocks, and pressures from the rising age-related costs, if unaddressed, could pose a concern for the pensions system.

Nevertheless, the Positive trend reflects DBRS’s view that the important improvement in the fiscal position over the past three years is likely to be sustained. A sound budget position, together with solid growth, is expected to lead to the further reduction in the public debt ratio. Improvements in the “Fiscal Management and Policy”, “Debt and Liquidity”, and “Economic Structure and Performance” sections of our analysis were the key factors for the trend change.

We are honouring our promise Scicluna

Finance Minister Edward Scicluna yesterday remarked on DBRS’ rating, “Four years ago, we had promised to work on upgrading Malta’s credit rating which would make our country more attractive to foreign investors. In contrast with the past deteriorating state of public finances with ballooning deficit and debt ratios, we directed our efforts to addressing such issues, bringing about an upgrade to Malta’s rating, and hence honouring our promise.”

DBRS noted: “Following a fiscal consolidation process since 2013, Malta’s fiscal outturns came in better than expected in 2016. Both the headline and the structural deficits turned into surpluses, and the government debt ratio, already 12 percentage points lower than its 2011 peak, fell below 60 per cent of GDP.

The improvement in public finances, DBRS observed, has been driven by strong revenues as well as moderation in expenditure, and supported by a strengthened fiscal framework. The fiscal over-performance also meant that Malta complied with