“In other words, a rich and a poor person’s stomachs need the same amount of food to survive, with the latter needing to spend a greater part of her or his income to satisfy basic needs.”

“Inflation hits those who are less better off in a disproportionate manner, irrespective of whether it is being caused mostly by the war in Ukraine or by the massive Quantitative Easing carried out by Central Banks.”

“That is why in Malta the reduction in utility bills in 2014 left such a positive effect on the standard of living of most people, especially thise struggling to make ends meet.”

Muscat predicted that governments (who he described as ‘policymakers’) and Central Banks will now face a dilemma on whether to raise interest rates in an attempt to control inflation or reduce them so as to boost economic activity and consumption.

Locally, he urged the government to come up with “new and creative tools” involving the private sector to stop inflation from running rampage on people’s quality of life without raising taxes.

“The likely immediate action will be to divert expenditure from recurrent and capital items to cushioning families and businesses if the European Commission is flexible enough to allow it. This is only a short term fix and can be counterproductive especially in the case of cuts in necessary capital expenditure,” he said.

“I am sure government will stick to the policy adopted over the last decade not to increase taxation. For that reason, the solution lies once again in the private sector which needs to be provided with the necessary incentives, be it in the form of quick decision making, regulatory space or PPPs, to create growth and sustainability.”

As Prime Minister of Malta, Muscat had strongly pushed forward the concept of public-private partnerships by setting up a government body called Projects Malta, which recently changed its name to Malta Strategic Partnership Projects Limited.

Trade Malta was also set up as a joint venture between the government and the Malta Chamber of Commerce to promote the internationalisation of Maltese companies. 

However, his strategy raised eyebrows when his government entered a PPP with Vitals Global Healthcare for the management of three hitherto public hospitals. The deal has long faced allegations of major corruption, with the National Audit Office finding evidence of collusion and VGH eventually forced to sell the concession to Steward Healthcare, leaving €36 million in debt.

The government’s strategy with regards inflation so far has been to use public funds to cushion the impact, including by issuing cheques to households, cushioning the costs of higher fuel bills and giving an unspecified amount of money to food importers to prevent further increases in food prices.

Earlier today, Energy Minister Miriam Dalli told a press conference that discussions are underway on how to help businesses cope with “challenges” posed by the Ukraine war.

“It’s indispensable to keep energy prices stable,” she argued. “The impact of any other decision could be larger on the nation and workers.”

What do you make of Muscat’s latest intervention?