Malta: Selected Issues
IMF Staff Country Reports, February 8, 2023
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- Malta: Selected Issues
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Bibliographic details
- Published: February 8, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400233715.002
Key findings and scope
- Compares Malta’s response to the energy crisis with that of other European countries and discusses the pros and cons of different policies, in light of the desirable policy priorities in the current context.
- Analyses the fiscal and distribution implications of alternative energy pricing policies in Malta, with a primary focus on electricity prices for households.
- Notes that the authorities have opted for freezing electricity and fuel prices.
- Observes that the authorities are stepping up efforts to increase renewable energy production, but that in the near term, Malta will continue to remain vulnerable to energy price shocks.
Fiscal and distributional analysis
- Examines how alternative energy pricing policies affect public finances and household welfare.
- Emphasizes that distributional impacts for households and fiscal implications are key considerations when designing an exit strategy from price freezes.
- Finds that allowing a full pass-through of energy costs to consumers would have a significant impact on households’ consumption in Malta but would be comparable with other European peers.
Simulation results on household burden
- Simulation suggests that household burden as a share of consumption is higher for low-income households, mostly due to higher electricity prices.
- Highlights electricity prices for households as the central channel driving distributional differences across income groups.
Policy considerations and trade-offs
- Trade-offs between protecting household consumption and maintaining fiscal sustainability are central to policy choices.
- Exit strategy design should balance distributional protection (especially for low-income households) and the fiscal cost of continued price freezes or subsidies.
- The analysis implies a role for targeted support and measures that consider both short-term vulnerability and the longer-term shift toward renewable energy.
Source: IMF Staff Country Reports — "Malta: Selected Issues" (February 8, 2023).
Content in this bundle
- Malta: Selected Issues; IMF Country Report No. 23/79; January 18, 2023