KUALA LUMPUR – Observers are calling on MPs to set aside their differences and reach a consensus to pass Budget 2021, with the vote expected to be held on November 25.
Institute for Democracy and Economic Affairs research manager Lau Zheng Zhou said it is normal for changes to be made to the document following debates among lawmakers.
He told Bernama that should the Budget not be passed, it would have significant ramifications for the country’s political stability and its ability to contain the Covid-19 crisis.
“So, the government and opposition must try to show leadership by reaching a consensus and producing a Budget that will truly help Malaysia recover more strongly.”
The Budget is being debated on in the Dewan Rakyat, and several MPs have threatened to vote it down unless amendments are made, including to the massive allocation for the Special Affairs Department.
The think-tank believes that overall, the Budget is balanced in its coverage of the country’s vulnerable populations, as well as business activities.
Lau said Budget 2021 aims to strike a balance between addressing job and income losses in the near term and laying the foundation for recovery over the medium and long term.
It is a continuation of four economic stimulus packages, he added.
However, he said, it lacks clear direction on how the country can prepare for an economic rebound.
“There were indications in the Budget 2021 speech that suggested how we could reset our economic model, such as focusing on bringing foreign direct investment in the high-tech sector and increasing sustainability investments.
“But, it lacks imagination, considering the scale of disruption caused by the twin health and economic shocks we are facing.”
He said a new social security plan is needed for informal workers, especially those in the gig economy.
“They are not exactly employees, so they have no access to companies’ medical benefits or health insurance.
“The government should consider a separate financial assistance programme for the most vulnerable segments of the population, say, people living in the interior of Sabah and Sarawak.”
Maybank Investment Bank Bhd chief economist Suhaimi Ilias said Budget 2021 is in line with the bank’s expectations of an expansionary budget, given its record-breaking price tag of RM322.5 billion, up from 2019’s RM317.5 billion.
The budget deficit will remain sizeable next year at RM84.8 billion, he said, not much changed from the RM86.5 billion deficit estimated for 2020.
"So, fiscal stimulus momentum is sustained in that sense. As usual, the concern is whether the Budget is enough.
"To provide some space for additional measures in the near future to deal with the Covid-19 impact if needed, Budget 2021 also proposed for the Covid-19 Fund limit to be raised by RM20 billion to RM65 billion.”
He said revenue is expected to increase 4.2% to RM236.9 billion in 2021, so the government has to finance the shortfall through borrowings.
He said there is ample and cheap domestic liquidity, thanks partly to Bank Negara Malaysia’s measures to reduce the interest rate and inject liquidity into the economy, among them statutory reserve requirement cuts and the purchase of government securities in the bond market.
Parliament has approved the raising of the statutory limit on government domestic debt to 60% of gross domestic product from the previous 55%, providing room for higher borrowings.
“During the global financial crisis, the statutory limit on the government’s domestic debt was raised twice, from 40% of GDP to 45% in June 2008 and 55% in July 2009,” said Suhaimi.
“Whether there is a need to raise again from the current ceiling of 60% of GDP depends on how the economy pans out over the next 12 months.
“The kinetics of the pandemic – in terms of whether we will be able to contain the current surge in cases, and how soon we can have safe and effective vaccines – will be important. The wild card is politics.” – Bernama, November 15, 2020
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