The cost of living adjustment will soon be supplemented by a new initiative after Finance Minister Clyde Caruana revealed that the government will be unveiling a new mechanism during the upcoming budget.
COLA is a mechanism employed to reflect the increase in the cost of maintaining a certain standard of living. This is calculated according to the prices of a wide variety of goods and their inflation.
The adjustment is usually announced during the budget speech.
However, Caruana, who was speaking in a pre-budget meeting, said that the government compensation for inflation should be targeted towards those who needed it most.
“It cannot be an adjustment that affects everyone as some do much better than others,” he said, adding that the last year showed that COLA no longer reflected modern realities.
The announcement follows a Central Bank policy note published last month which suggested introducing a second index – besides COLA – to track inflation experienced by low-income households after it observed that they experienced significantly higher rates of inflation than the average household.
Caruana was coy on details of the mechanism but said that it will involve discussions with key stakeholders over the new formula.
He said that ultimately the mechanism will benefit those who are the most vulnerable in the country.
“If we don’t do it, no one will,” Caruana said.
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