Article by David Curmi
The recent announcement of Malta’s 2026 Malta Government Stock (MGS) issuance programme has once again highlighted a familiar dynamic: a growing funding requirement with strong investor appetite expected to meet this requirement.
The Government has indicated that it is looking to raise up to €1.9 billion through Malta Government Stocks (MGS) in 2026, with proceeds earmarked to finance an estimated €852 million deficit and refinance maturing debt of just under €1 billion.
At one level, this reflects a well-functioning and liquid domestic debt market. Malta has consistently demonstrated its ability to tap local savings, with government paper remaining a cornerstone investment for both retail and institutional investors, especially at higher interest rates. Domestic investors continue to show that they are not only willing—but ready—to absorb sizeable issuance, supported by strong and generally improving credit ratings. Beyond this what does this level of borrowing say about Malta’s fiscal trajectory—and how sustainable is it?
In truth Malta remains a strong credit story. As a country we benefit from an A sovereign rating(Fitch A+, S&P A-, Moody’s A2) with a stable outlook, supported by very solid economic growth. Government debt stands at around 46–47% of GDP, comfortably below the euro area average and a key anchor of credit strength. There have also been encouraging signs on the fiscal front. The deficit has narrowed towards the 3% of GDP level, supported in part by strong revenue performance and strong tax receipts, not only from recurrent revenue but improved tax collection. In Q1 2026, government finances even registered a short-term surplus, reflecting the underlying momentum in tax receipts. Meanwhile despite the large funding requirement of the government, banks remain extremely liquid with deposits growing only at a slightly slower pace than the government deficit over the last 4 years. This indicates that there is no stress on government funding and investors continue to have the capacity to absorb the increased deficits that are forecast.
However, the picture is not without complexity. The scale of planned issuance combined with the ongoing need to refinance maturing debt—points to a growing structural reliance on borrowing. Annual deficits of approximately €800-€900m combined with maturities of a similar size over the next 5 years indicate that the government is going to be issuing close to €2bn of bonds p.a. for the foreseeable future. Meanwhile the interest cost of such debt is going to continue eating into revenue with the primary balance starting to look more fragile as the interest cost to government revenue ratio continues to rise. A key consideration here is the extent to which government is going to be able to continue increasing its revenue against an economic backdrop that is showing signs of fatigue. The continued funding of structural social programs and now the increased energy subsidies is going to create an element of fiscal fragility. While these policies have played an important role in shielding households and businesses, they also carry an ongoing fiscal cost that may become more pronounced over time. Better control of recurrent expenditure, not just improved tax collection is going to be required.
At the same time, the interest rate environment has shifted. Malta has approximately €5.2bn of debt(excluding T Bills) maturing over the next 5 years. The average interest cost of this debt is 2.9%. The new government bonds are being issued at 3.5% and 4.1%. Do the maths and you’ll quickly realise the dynamics at play.
None of this however suggests that Malta’s debt position is unsustainable. On the contrary, by international standards, the country remains relatively well-positioned. It is not where we are today that is important, it is where we are heading and how we get there that must be monitored. A debt ratio in the mid-40% range provides room for manoeuvre. The question is how that room is used.
If borrowing supports productive investment that enhances long-term growth, the case is straightforward. If, however, borrowing increasingly finances recurrent expenditure, the longer-term implications become more nuanced. This distinction is not academic. It is central to how investors assess sovereign risk over time. Our track record in this respect is not good as deficits have grown, even as GDP growth remained very strong. A deficit that has continued to grow, primarily driven by recurrent expenditure and not investment expenditure increases the risk that should revenue growth slow, our headroom will quickly disappear.
For investors however, Malta Government Stocks continue to offer a compelling proposition. A strong sovereign backing with stable credit ratings and a deep and reliable domestic investor base. These strengths should not however breed complacency. A country can borrow heavily for many years without consequence—until suddenly markets begin to question not its ability to borrow, but its willingness to control spending. That is why the real challenge facing Malta is not whether it can issue government stock successfully. This is not in doubt. It is whether it can continue to do so while still convincing investors that the deficit remains under control.
David Curmi is Chief Officer – Business Development & Client Relationships at Curmi & Partners Ltd.
The information presented in this commentary is solely provided for informational purposes and is not to be interpreted as investment advice, or to be used or considered as an offer or a solicitation to sell/buy or subscribe for any financial instruments, nor to constitute any advice or recommendation with respect to such financial instruments. Curmi & Partners Ltd may distribute Malta Government Stocks and may have a commercial interest in investor participation in the MGS programme. Curmi & Partners Ltd, with registered address Finance House, Princess Elizabeth Street, Ta Xbiex, Malta XBX 1102, is a member of the Malta Stock Exchange and is licensed by the MFSA to conduct investment services business.