IF THE MALTESE ECONOMY WERE A SUCCESS, WHY IS MALTA’S DEBT GROWING SO RAPIDLY?

by Reader

 The Labour Party’s claim that Malta’s national debt, at roughly 50% of Gross Domestic Product (GDP), is manageable obscures a dangerous reality. This statistic, often cited to dismiss fiscal concerns, relies on a flawed assumption: that Malta’s GDP, heavily driven by foreign workers and government no-show jobs, is stable. With the national debt at €10.8 billion in 2025 and projected to rise by about €1 billion annually until 2030, according to Hamburg-based Statista.com, Malta faces a looming economic crisis fuelled by Labour’s mismanagement and over-reliance on transient labour and fake government jobs.

Malta’s population in 2023 included around 135,000 foreign workers, and an estimated 140,000 Maltese citizens working full-time, with the two numbers being roughly equal. Foreign workers contribute nearly half of Malta’s GDP, a dependency unmatched in most economies. Labour apologists use this inflated GDP to argue the debt is sustainable, but this ignores a critical vulnerability: if economic conditions worsen, foreign workers could leave, halving the GDP overnight and doubling the debt-to-GDP ratio to about 100%. If young Maltese employees emigrate for better income, the ratio deteriorates further.

This scenario is not far-fetched. Greece’s economic collapse saw minimal impact from departing foreign workers, as they were few, but it suffered from mass emigration of young Greek workers. Malta is already witnessing similar trends, with Maltese nurses and professionals leaving for better opportunities in the UK and elsewhere. This brain drain, coupled with Malta’s projected population decline, expected to halve in 45 years, shrinks the taxpayer base, leaving fewer Maltese to shoulder the growing debt. Unlike foreign workers, who can depart without debt obligations, the remaining citizens on the island will bear the full burden.

Labour’s economic model, centred on importing foreign labour, is unsustainable. While it boosts sectors like gaming and tourism, it strains public resources. Foreign workers demand healthcare, education, infrastructure, and policing, costing the Treasury more than their tax contributions often yield. These expenses subsidise the profits of Maltese entrepreneurs in construction and hospitality, widening inequality. The rich entrepreneurs grow richer, while ordinary Maltese face stagnant wages and rising costs. Interest payments on the debt, projected to rise from €209 million in 2023 to €349 million by 2026, further strain public finances. Malta’s national debt is expected to grow from €10.0 billion in 2023 to €13.1 billion by 2026, leading to increased debt servicing requirements.

The government’s failure to diversify the economy or invest in upskilling Maltese workers exacerbates this fragility. Labour’s “in-work” benefits and childcare schemes have not addressed the root issue: an economy overly dependent on transient labour. If Labour’s model were effective, why is Malta’s debt growing so rapidly? The answer lies in mismanagement and wasteful spending, such as energy subsidies that defy EU recommendations.

The Labour economic model can be described as a “beach cleaners’ economy,” where every day, the cleaners try to restore the beach to what it looked like the day before, preserving the status quo. As a result, the beach remains the same, but the beach cleaners’ bill tallies up.

Instead, Malta needs a conservative vision that prioritises sustainable growth. Investing in high-value industries, upskilling local workers, and addressing infrastructure bottlenecks are essential. The IMF’s calls for structural reforms, including increased R&D investment, must be heeded. Labour’s 50% debt-to-GDP narrative is a mirage, masking the reality that half the GDP could vanish with an economic downturn. With the national debt rising exponentially, Malta must act now to avoid a future where a dwindling Maltese workforce is crushed by debt. Labour borrowed heavily over the years to create an illusion of wealth. The more beach cleaners it recruited for its fixed number of beaches, the more it increased the GDP, and the borrowing to pay for it. As a result, it increasingly cannot pay off the debt without lowering the GDP. As the proverb goes, “You can’t borrow yourself out of debt.”