Preparing Budget 2023 could probably be Anwar’s greatest balancing act.
He needs to find ways to manage the unprecedented deficits and debt payment plans without crippling the economy while finding the best ways to support the country’s economic recovery.
Spending is likely to rise as the government needs to move from immediate support to households and businesses toward fostering long-term economic recovery.
The dual imperative of saving livelihoods and managing the ever-increasing rising costs of living while managing the national debt of RM1 + trillion creates the need for a great balancing act over the next few years.
Can Anwar and his unity government pull it off?
Balance and prioritisation of needs should definitely be the key in this budget.
There is already concern that the increased debt servicing costs will crowd out investments in areas such as reskilling, health and education.
The government must seek to ensure that there is sustainable growth in the economy rather than to just continually give handouts.
Given the continued tight fiscal position of the country, it is unlikely that the government will be able to put back the RM5 billion it has drawn from the National Trust Fund (KWAN) for vaccine procurement.
Any rise in taxation should not hamper business innovation and growth and the country’s competitiveness. Increase, if any, should be on more equitable taxes, with higher taxes on high-end properties, luxury cars and the sin industries like alcohol, tobacco and gambling.
Yes, the unity government can improve the effectiveness of tax collection and undertake careful reviews and reallocation of the budget to ensure spending is towards the highest priorities while delivering savings through better procurement and fraud reduction.
The unity government should also prioritise and invest in areas such as:-
- addressing the needs of an ageing population
- enhance the resilience and competitiveness of the country by building up local capabilities and upskilling our workforce as the global economic landscape becomes increasingly fragmented
- unemployment transition support and how to manage the current manpower squeeze in plantations, hospitality and the f & B industry as companies now tried to outbid each other for workers
Given the scale of the fiscal challenge, the unity government should consider a broad portfolio of available levers.
For a start, the unity government will need to adopt bold revenue-enhancement and cost-containment strategies.
For example, Anwar can harness new data sources and analytics tools to plug revenue leakages.
The RM300 billion shadow economy, costs the government at least RM33 billion in uncollected taxes each year while the illicit tobacco trade cost the government RM5 billion in uncollected tax losses a year.
A government backbencher has proposed the listing of Petronas as one of the measures to reduce the national debts.
An even greater opportunity lies in creating transparency into the government’s entire balance sheets. Example: all publicly owned assets including land and property and state-owned enterprises are all valued properly, managed professionally, and securitized or monetized where appropriate.
There is considerable scope to manage and monetize such assets more effectively, both to strengthen fiscal sustainability and to support broad-based economic recovery.
And the use of balance-sheet levers could unlock considerable value for the country with minimal procyclical effects.
The unity government they will need to find the optimal ways to support economic recovery, at the national level, for individual companies, and for the people and presently there is a historic opportunity for government and the private sector to forge a new social contract for and inclusive and sustainable growth for the country.
E.g there are opportunities to structure the various relief and stimulus packages that are still being implemented in partnership with the private sector to help prepare workforces for a technology-driven future and improve the long-term competitiveness and resilience of key industries.
Cost containment strategies will form part of a broader drive, without sacrificing the scope or quality of services, to improve public-sector productivity – as mapped out in the 11th Malaysia Plan, 2016-2020 – which could potentially save the government billions.
In the months ahead, the government should work with the private sector to design stimulus measures that not only drive recovery but also support the long-term reimagination of the economy and society.
There is room for smart, trust-based collaboration between government and business to rebuild and reimagine key sectors of the economy.
Success would result in a new social contract that shapes a post crisis era of shared, sustainable prosperity.
Failure is not an option.
The stakes are high, and the need for bold, visionary leadership in the public and private sector has never been greater.
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