PETALING JAYA: The revised Budget 2023 announced last Friday which includes targets to reduce fiscal deficit to 5% as well as proposed legislative amendments and new enactments are challenging but necessary, said economists.
Economist Nungsari Ahmad Radhi said the target to reduce fiscal deficits to 5% in 2023 from 5.6% in 2022 and to further 3.2% of GDP by 2025 is one that would be welcomed by markets.
“This defines the broad target for fiscal policy of this government. It is challenging but a very good and necessary fiscal target,” he said in an interview with SunBiz.
Prime Minister Datuk Seri Anwar Ibrahim had announced that the government plans to achieve a fiscal deficit in the medium term with a target of 3.2% of GDP by 2025 so as to curb the increase in debt, new loans must be lower.
“The Fiscal Responsibility Bill will be presented to parliament this year, to ensure transparency and accountable management of the economy to prevent transgression in the future,” Anwar said at the retabling of Budget 2023.
Malaysia’s debt-to-GDP ratio is seen at 60.4% in December last year, up from 55% before the pandemic. It reached an all-time high of 64.6% in Sept 2021 and a record low of 49.3% in Sept 2011.
The government expects revenue collection for 2023 to be lower at RM291.5 billion compared to RM294.4 billion last year due to lower crude oil prices. Petronas is expected to pay a RM40 billion dividend this year, lower than last year’s RM50 billion.
Nungsari applauded the legislative proposals to amend existing laws and enacting new laws to affect fiscal policy, which he said is how policy should be done – mainly through legislation.
“That’s why we elect the Dewan Rakyat as a legislative body. The government uses the legislation to affect policy including fiscal policy. This government has elevated the status of parliament,” Nungsari said.
UniKL Business School associate professor Aimi Zulhazmi Abdul Rashid commented, “The budget is the largest in history. With spending of this magnitude, it is expected to put pressure on the government to strike a balance between fiscal policy and reducing the national debt which has reached RM1.2 trillion.”
“Clearly the challenges are unlikely to be addressed in such a short period of time as it is only one annual budget. The situation requires economic restructuring which takes more time,” Aimi told Sunbiz.
Pacific Research Center Senior Fellow Amanda Yeo said that the budget has yet to clearly indicate how to increase government revenue despite introducing capital gain tax and the tax on luxury goods.
“Open tender in some government projects is a good start but still it’s wiser to allocate spending wisely with limited government budget. And it is important for the government to keep track of all development projects, (construct according to timeline and with quality control), to ensure no one is left behind,” Yeo told SunBiz.
The refreshed Budget 2023 has expanded to RM388.1 billion from the RM372.3 billion proposed by the previous government before the dissolution of parliament and RM332.1 billion in Budget 2022.
The fiscal budget comprises RM289.1 billion operating expenditure and RM99 billion development expenditure, including RM2 billion in contingency reserves.
The refreshed Budget 2023 allocates RM55.2 billion for the Education Ministry as the highest beneficiary, Health Ministry receives the second-largest allocation at RM36.3 billion, while the Higher Education Ministry gets RM15.3 billion.
