An economist emphasised that the revised Budget 2023 should provide more clarity on the country’s fiscal consolidation process amid reform tax policies and subsidies given to the people and the government’s plans for the implementation.
Employees’ Provident Fund (EPF) head of economics and research Dr Mohd Afzanizam Abdul Rashid said the budget, which is scheduled for re-tabling on Feb 24, should continue to focus on main areas, namely education, healthcare and infrastructure, while at the same time ensuring it is a business friendly budget.
“Allocation needs to happen so we can spend on capacity-building for the long term. But given our limited fiscal space, the government needs to relook its spending strategy but at the same time, still stimulate the economic activity for both locals and foreigners,” he told Bernama recently.
Nevertheless, Afzanizam said the government’s debt in totality is primarily ringgit denominated; therefore, the chances of the government defaulting on its own currency debt are low because it has the flexibility to raise the debt limit.
He added that Malaysia has large institutions like pension funds and banks, so these institutions would continue to subscribe to government securities, which are deemed very liquid and safe in terms of credit.
The original Budget 2023 was presented on Oct 7 last year by then finance minister Tengku Datuk Seri Zafrul Abdul Aziz, with a total allocation of RM372.3 billion.
In January, Prime Minister Datuk Seri Anwar Ibrahim said that the country’s national debt, including liabilities, had reached RM1.5 trillion, more than 80% of the country’s GDP.
Afzanizam also said that the budget deficit would widen further than the earlier estimate of 5.8% of the GDP for 2022.
“With the message that our debt is high, perhaps the government is signaling a lower Budget 2023 allocation. But at the deficit level, the trajectory is going down, and that will be a good start.
“When your deficit to gross domestic product (GDP) ratio keeps on going down, ultimately your debt level will follow suit,” he said, adding that the two previous budgets announced were expansionary.
Asked about suggestions on how the government can increase its revenue, the economist said while the Goods and Services Tax (GST) has been the talk of the town, it is not the right time to impose the tax.
“But I suppose when they do, they need to relook at it and learn from the past on the problems associated with GST, so that the next time they decide to impose it, there would be less hassle for the businesses to adhere to the regime.
“From the past, we can see that the GST collections were very forthcoming and have shown good results. But there were also issues associated with the tax, such as input tax-credit claims, zero-rating and exemptions, that created confusion for businesses.
“So assuming they want to re – implement the GST in the future, maybe we can start low in the range of 3% to 4%, and it can be adjusted over time,” Afzanizam said.
On Wednesday, Anwar Ibrahim hinted that allocations under Budget 2023 would be “reduced” without neglecting the country’s development programs.
“We will cut where possible, and this reduction will not put a strain on our development programs,” he said after chairing a Cabinet meeting.
- The Edge Markets