KUALA LUMPUR: Malaysia is committed to improving its fiscal risk management framework in accordance with international standards by introducing the Fiscal Responsibility Act (FRA).
The Ministry of Finance (MOF) in its Fiscal Outlook and Federal Government Revenue Estimates 2023 report released yesterday said the commitment, among others, is to enhance administrative controls by incorporating control measures as a part of the legal framework and enhancing fiscal risk reporting and governance.
“The forthcoming FRA will include clauses that require the government to determine provisions on policy decisions, circumstances and situations that will contribute to highly probable materialisation of contingent liabilities.
“The proposed legislation may include a provision requiring the government to publish a ‘fiscal risk statement’ and provide statutory limits on certain contingent liability instruments such as government guarantees.
“The introduction of the FRA will support the government in enhancing fiscal risk management, while improving Malaysia’s fiscal policy formulation in accordance with international standards and global best practices,“ it said.
In June 2022, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said the MOF plans to table the Fiscal Responsibility Bill in Parliament by the end of this year.
In the meantime, the report highlighted that there was an exponential improvement in the country’s fiscal risk management in the last few decades, contributed by the lessons learnt from numerous episodes of crisis.
Currently, the fiscal risk framework is divided into three main components, namely legal framework, administrative control, and monitoring committee
“However, the need for a more comprehensive fiscal risk management is increasingly important in line with the changing dynamics of the world.
“Unexpected occurrences of events such as geopolitical crises, spread of diseases and natural disasters can distort the global trade supply chain, hence affecting the fiscal outcome of a country,“ MOF added.
The ministry also noted that continuous risk identification and assessment are being carried out to ensure proper policy responses in mitigating the impact.
The government has identified potential fiscal risks in the coming years that may affect public finances - inflation and higher subsidy expenditure; slower growth outlook; moderated commodity price in 2023; policy tightening by the United States Federal Reserve; elevated debt burden; and extreme weather conditions. - Bernama