KUALA LUMPUR, Sept 24 ― Putrajaya’s decision to seek an extra RM14 billion to supplement Budget 2013 yesterday puts into question its assurances of financial reforms and prudence at a time when it is being watched by global ratings firms, said economist.
The economists further added that tabling a Supplementary Supply Bill just one month before Budget 2014 could weaken the economy if it does not deliver the intended results and may prompt investors to react negatively, according to Singapore’s Business Times today.
“It comes at an inappropriate time as the government is trying to strengthen the fiscal position and to stop the public debt from rising,” Bank of America Merrill Lynch economist Chua Hak Bin told the BT.
Chua was also taken aback by amount requested, saying it represented approximately 1.5 per cent of the country’s gross domestic product (GDP).
Yesterday, Deputy Finance Minister Datuk Ahmad Maslan tabled the request for RM14 billion in additional funds to shore up Budget 2013.
If approved, the Bill will see the billions channelled to 16 ministries, government departments and agencies.
“The RM14 billion is disproportionate to the direction of what the government is trying to do with the fiscal trajectory,” Chua said further in the report.
Putrajaya has stated that it intends to trim its chronic budget deficit to 3.5 per cent next year and down to 3 per cent in 2015.
The yearly deficit that began during the Asian Financial Crisis has led to it amassing a national debt of over 53 per cent of GDP, which is straining against the legal debt ceiling of 55 per cent of GDP.
According to Chua, the sum of all the factors augurs poorly for Malaysia’s prospects.
“I do not see how with slowing growth, rising costs and an increase in the supplementary budget, the debt ceiling will not be breached,” the economist said.
In July, global ratings firm Fitch also took a downcast view of Malaysia’s financial future and downgraded the country’s credit outlook from “Stable” to “Negative”.
Among others, it cited Malaysia’s weak public finances and reduced hopes for fundamental reforms following the government’s reduced mandate after Election 2013.
Putrajaya vowed to address the firm’s criticisms in Budget 2014, but was forced to jump the gun early this month by slashing consumer subsidies for RON95 petrol and diesel following fears of a renewed regional financial and currency crisis triggered by rumours of a cutback in the US Federal Reserve’s stimulus programme.
But despite the 20 sen a litre cut to subsidies for both grades of fuel, which the government said could save Malaysia some RM3.3 billion annually at present oil prices, Fitch was unmoved and said more substantial reforms were still needed to change its outlook on Malaysia.
Prime Minister Datuk Seri Najib Razak is scheduled to table Budget 2014 on October 25.
All eyes will be on the Budget to see if Putrajaya introduces financial reforms such as the long-delayed Goods and Services Tax (GST) to widen its tax base.
