Budget to the nation’s rescue

While delivering his speech at the 2020 International Greentech & Eco Products Exhibition & Conference Malaysia (IGEM), prime minister Tan Sri Muhyiddin Yassin said a special focus on sustainability agenda would be included in Budget 2021, with a very important announcement on it to be made by the government.

On the sustainability agenda, the prime minister said in addition to harnessing our natural resources to exploit and develop green technology, the country would also focus on long-term development industries and policies. Take the Green Technology Master Plan (GTMP) for instance, the government will draw up a 10-year green technology development strategy gearing towards sustainability.

As such, we assume that Budget 2021 will prioritize sustainable long-term development industries and policies, and will be an extension of the past few annual budgets.

Some RM297.02 billion was set aside in Budget 2020, including RM241.02 billion for operating expenses and RM56 billion for development expenses at an estimated budgetary deficit of 3.2% of the country’s GDP.

In other words, of the total allocations, only RM56 billion was for planned development expenses, while the rest would be spent on operations at various government departments and civil servant remunerations, among others. The impact of the coronavirus pandemic was not yet taken into account when Budget 2020 was tabled.

In view of this, Muhyiddin cannot afford to go down the same old way when compiling the 2021 Budget. He will have to plan for a much longer term and focus on sustainable long-term development. This is not something that can be achieved within a year or two, and the Budget needs to have a macroscopic perspective.

From the political point of view, the November 6 tabling of Budget 2021 will determine whether Muhyiddin can prevent his administration from falling apart. On the back of worsening virus outbreak, economic downturn and expected sharp decline in the government’s tax revenue in the coming year, how is the prime minister going to come up with a fiscal budget that will benefit the people to take care of the people’s livelihood while promoting sustained operations of local businesses? The long-term sustainability agenda should be an effective solution in the upcoming Budget.

If the prime minister is only looking at short-term effects, then it will be difficult for him to come up with a truly effective Budget that will address the country’s problems.

Firstly, IMF reported last week that Malaysia’s GDP will shrink by 6% or almost RM92 billion this year. As such, the government’s tax revenue next year is expected to dwindle drastically, meaning the government will not have sufficient funds to develop the country and this will in turn impact the lives of ordinary citizens. New sources of income need to be explored in order to expand the Treasury’s financial capability.

Secondly, the government must tighten its belt, but then how to slash the operating expenses which sum up to RM241 billion for 2020?

The number of civil servants has been rising steadily over the past few decades but have the annual allocations for various government departments been spent wisely and effectively? Are corruption and abuse of power on the part of government officials still very much in practice today?

The debts that have accumulated over the decades are too large to be settled within two or three years’ time. It is imperative for government departments to cut their expenses during this critical moment, and we cannot afford to have an expanded operating budget over this year’s.

Thirdly, last year’s budgetary deficit was at 3.2% of the GDP, and increasing the budgetary deficit will likely be a hurried and important option for Muhyiddin. He may have to fix the near-term problems first and pin his hopes on a strong economic recovery next year.

Fourthly, the government needs to address the issue of poverty among the people. Currently the total income of the lowest 20% (B20) stands at about 5.9% of the total income. Their per capita income is merely US$3,313, or about RM1,160 per month, roughly equivalent to the country’s “absolute poverty” household income of RM2,200.

To put up a good fiscal budget will depend on the wisdom of the prime minister and his finance ministry think tank, as this will be the most challenging mission to be undertaken by the ruling authorities in the nation’s 63 years of history since independence. Muhyiddin will win the trust of the rakyat if he is capable of doing that.


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