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KUALA LUMPUR: Observers are calling for MPs to put aside their differences and reach consensus to approve the proposed budget for 2021 during the parliamentary voting session, which is expected to take place on November 25.
The research director of the Institute for Democracy and Economic Affairs (IDEAS), Lau Zheng Zhou, said that it is normal for parliamentarians to participate in the debate and that the changes are reflected in the final budget document.
However, he stressed that if the budget is not approved, it would have significant ramifications on the country’s political stability and its effectiveness in addressing the Covid-19 pandemic crisis.
“Therefore, the government and the opposition should try to show leadership by reaching consensus and producing a budget that really helps Malaysia to recover more strongly,” Lau told Bernama.
The budget is currently being debated in the Dewan Rakyat, and several MPs have threatened to reject it unless amendments are made, such as the substantial allocation to the Department of Special Affairs (JASA).
In general, the think tank believes that the key measures presented in the budget are balanced in their coverage of the vulnerable segment of the population, economic and business activities.
Lau said the budget aims to strike a balance between addressing job and income losses in the short term and laying the foundation for a medium and long-term recovery.
He said the budget is a continuation of the four economic stimulus packages, as the country enters the revitalization stage of the economic recovery process.
However, Lau noted that the 2021 budget fell short in providing strong and clear direction on how the country can prepare for an economic rebound or restart.
“There were indications in the 2021 budget speech that suggested how we can reset our economic model, such as the focus on attracting foreign direct investment in the high-tech sector and also increasing investments in sustainability.
“But it lacks imagination, considering the magnitude of the disruption of the two economic and health impacts that we face as a country,” he told Bernama.
Lau said a new social security plan is needed for informal workers, especially those in the gig economy.
“They’re not exactly employees, so they don’t have access to company health benefits or health insurance.
“The government should also consider a separate financial assistance program for the most vulnerable segment of the population, for example in the interior of Sabah and Sarawak,” he added.
Lau noted that there were several financial assistance programs, but the most vulnerable deserved a separate program to address their unique conditions.
Expansive budget
Meanwhile, Maybank Investment Bank Bhd (Maybank IB) chief economist Suhaimi Ilias said the budget was in line with the investment bank’s expectations of an expansive budget, given record total spending allocations of RM322.5k. million, up from the previous record of RM317.5 billion in 2019.
Consequently, the budget deficit will remain sizable in 2021 at RM 84.8 billion, unchanged from the RM 86.5 billion deficit estimated for 2020, he said.
“So, the momentum of the fiscal stimulus continues in that sense. As usual, the concern is whether the budget is sufficient.
“To provide some room for additional measures in the near future to deal with the impact of Covid-19 if necessary, the budget also proposed that the Covid-19 Fund limit be raised by RM20 billion, from RM45 billion to RM65 billion, “he told Bernama.
Suhaimi said that revenue is expected to increase 4.2% to RM236.9 billion in 2021, so the government has to finance the budget deficit of RM322.5 billion through loans.
It noted that there was ample and cheap domestic liquidity, thanks in part to Bank Negara Malaysia’s measures to lower the interest rate and inject liquidity into the economy, such as cuts in the legal reserve requirement and buying government securities on the market. bond.
“I understand that the vote on Budget 2021 will be on November 25, so we will see what happens then. Hopefully politicians put the people and the country ahead of politics, ”he said.
Meanwhile, the Dewan Rakyat also approved raising the statutory limit on the government’s domestic debt to 60% of gross domestic product (GDP) from 55% of GDP, leading to higher loans.
“During the global financial crisis, the legal limit on the government’s domestic debt was raised twice, from 40% of GDP to 45% of GDP in June 2008, and to 55% of GDP in July 2009.
“Whether there is a need to increase again from the current ceiling of 60% of GDP depends on how the economy develops over the next 12 months,” Suhaimi said, adding that the economic growth prospects for next year would depend on Covid- 19. pandemic developments, policies and policies.
He said the opinion of mainstream economists, including international agencies such as the International Monetary Fund (IMF), is that the economy will recover in 2021, and the government is tackling the policy part with the budget, along with an accommodative monetary policy. to support the economy. Recovery.
“The kinetics of the pandemic, in terms of whether we will be able to contain the current increase in cases and how soon we can have safe and effective vaccines, will be important. The wild card is politics, ”Suhaimi said.
