Malta to keep €400 million in energy and food subsidies in 2027 amid fiscal tightrope
The Maltese government has confirmed it will maintain €400 million in combined energy and food subsidies for 2027, a decision Finance Minister Clyde Caruana says is necessary to avoid a sharp spike in household costs and protect employment. The pre-budget document released on 30 September outlines continued support for fuel, electricity and gas prices — a policy that has kept Maltese consumers among the lowest payers in the EU.
Electricity costs in Malta average €0.1282 per kWh, roughly half the EU average, while diesel sits at €1.21 per litre, far below the regional high of €2.58. These price caps have helped keep inflation at 2.1% in July 2026, below the 2.7% EU average. For 107,000 low-income families, identified by the Social Services Ministry last month, the subsidies act as a critical financial cushion.
A policy with hidden costs
While stabilising consumer prices, the subsidies have significantly strained public finances. Over the last five years, Malta has spent €1.35 billion on energy subsidies alone, the highest total in the EU relative to GDP. In 2026 alone, subsidies are projected to consume 1.4% of national output — nearly double Cyprus’s 0.3% and far beyond Finland’s negligible intervention.
The European Commission estimates this spending has contributed directly to 46% of Malta’s public debt increase between 2022 and 2025, pushing the deficit down from 3.4% in 2024 to 2.2% in 2025, only to rebound in 2026 to 2.8% of GDP — a level expected to hold steady through 2027. The government currently has just €75 million allocated for new energy infrastructure, a sum dwarfed by what is spent maintaining cheap prices.
Stifling green progress
The fixed pricing system has undermined efforts to reduce Malta’s dependence on fossil fuels. 85% of electricity is still generated from oil and gas, and renewable energy accounts for only 16% of total consumption, well beneath the EU’s 2030 target of 42.5%.
The Central Bank of Malta and the IMF both warn that low energy prices remove incentives for households and businesses to invest in efficiency or renewables. One study found that without subsidies, green investment would have risen by nearly 30% since 2022. Meanwhile, Maltese households have recorded the highest energy consumption increase in the EU since 2015 — up 66% — while other countries cut usage.
Balancing act for the future
The government insists removing subsidies now would cause a €630 million drop in GDP and the loss of over 3,000 jobs by 2028. Yet critics argue these short-term protections come at the expense of long-term resilience. With Malta aiming for carbon neutrality by 2050 and a 77% emissions cut in power generation by 2030, the current policy contradicts national and EU climate commitments.
Compounding the challenge, Malta is set to receive €2.27 billion from the EU’s Just Transition Fund — including €469 million for clean energy and efficiency projects. But without a shift in pricing policy, those funds may struggle to create meaningful change.
The Social Climate Plan for 2026–2032, which allocates over €60 million to help vulnerable households, offers a possible path. It targets home energy improvements, public transport access, and insulation grants — measures that could reduce reliance on subsidies by changing behaviour, not just capping prices.
For now, the government’s position remains firm: protecting income and jobs outweighs the fiscal and environmental risks. As the 2027 budget takes shape, Maltese households will continue benefiting from low bills — but whether that stability lasts beyond this decade remains uncertain.
