IMF calls for stronger financial integrity and operational independence in Maltese financial services regulation
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Fund welcomes Government’s measures aimed at limiting and containing the adverse social and economic effects of the COVID-19 outbreak
In its assessment of Malta’s economic and financial performance, the International Monetary Fund has once again warned the Maltese authorities to up their game in safeguarding the integrity of its financial markets, urging them to address deficiencies related to money laundering. The Fund also calls for a strengthening of the MFSA as financial services regulator, most importantly by recommending its operational independence.
The report puts its lens on a growing trend among Maltese businesses, that were inter-company lending is gradually displacing bank lending as the main source of corporate funding, posing new challenges to supervision. “A better understanding of the flow of funds between corporates and of their risk-management practices could help identify potential financial risks and contagion channels to the financial system”, says the IMF.
In its economic analysis, the IMF described Malta as one of the fastest growing countries in the EU. The economy continued to growth at a significant pace in 2019, albeit at a slower rate than the previous year. However, the report stressed out once again that growth was “heavily reliant of foreign labour”. This has placed pressure on housing and public infrastructure, while also increasing issues related to social inclusion. Economic growth in Malta was expected to reach its peak in the coming quarters, a forecast made before the coronavirus brought large chunks of the economy to a halt.
The report notes that Malta is facing significant challenges owing to the recent COVID-19 outbreak as entire sections of the Maltese economy, especially in the services sector, are forced to operate well below normal capacity due to reduced labor supply and administrative closures. Sectors related to tourism and transportation, which provide major sources of income for the Maltese people, are especially affected. The IMF welcomes the authorities’ near-term efforts to focus on limiting and containing the adverse social and economic effects of the COVID-19 outbreak.
The Fund also calls on Government to further support the inclusion on encouraging female and elderly participation in the job market, upskilling the labour force and stimulating innovation.
Moreover, to safeguard the business climate, remaining governance shortcomings should be addressed without delay, including by stepping up the fight against corruption and by increasing the efficiency of the judicial system while ensuring its independence. Improving access to affordable housing remains a key priority in support of greater inclusion.
