KUALA LUMPUR, Jan 29 ― Putrajaya must think further ahead instead of resorting to one-off measures to trim government spending amid falling oil prices, World Bank economist Dr Frederico Gil Sander has said.
Gil Sander said the Malaysian government should take a more sustainable approach by rolling out medium-term plans to manage its finances, pointing out that Putrajaya may not be able to rely on one-off measures again if low oil prices continue to dent the oil-producing country’s income.
“We announced a lot of one-off things, cutting the National Service, doing things that are very much ad hoc.
“So if the oil prices remain low for 2016 which is a quite likely scenario ― certainly something the government would want to prepare for ― it’s less clear that we can do again these one-off measures in 2016,” the senior country economist for Malaysia was quoted saying yesterday by news portal Malaysiakini.
Last Tuesday, Prime Minister Datuk Seri Najib Razak announced that Putrajaya would cut out RM5.5 billion in the government’s operational expenditure from the Budget 2015 to cope with a revenue shortfall of RM13.8 billion.
Among the spending cuts in the revised budget was freezing the National Service programme for youths this year to save RM400 million and postponing the planned purchase of RM300 million worth of non-critical assets for the civil service.
When announcing the revision, Najib said that despite factoring in savings of RM10.7 billion through Putrajaya’s removal of fuel subsidies for the public, the government would still face a shortfall in revenue of RM8.3 billion.
Yesterday, Gil Sander also reportedly proposed that the federal government map out medium-term budgets for each ministry, with the understanding that they would be working with limited resources due to low oil prices.
He suggested that Putrajaya may seek additional funds of RM5.2 billion by tabling a supplementary budget this year, noting that there was a gap between the Budget 2015 tabled by Najib last year and the Ministry of Finance’s actual Budget report.
“Ideally, when you do the budget the first time, you should include all the policy measures. If you want a bonus for civil servants, that’s fine, but it should actually be on the budget.
“And if that doesn’t fit with your deficit target, prioritise it,” he reportedly said when criticising Putrajaya’s practice of tabling supplementary budgets.
The economist also reportedly said Putrajaya had to work to prevent the need to reintroduce fuel subsidies for the public if global oil prices start to climb again.
“Now is the time to do it because you have the time of one or two years to think about what mechanism would be better to implement in order to protect the vulnerable households when the oil price is increased,” he was quoted saying at a forum on the World Bank’s report titled “Malaysia Economic Monitor: Towards a Middle-Class Society”.
Late last year, Putrajaya scrapped the use of its funds to provide subsidies that allowed Malaysian consumers to buy fuel at a cheaper rate, in favour of a managed float mechanism that is based on market rates.
Although the removal of fuel subsidies could have been an unpopular move, Putrajaya’s decision was made amid low oil prices that it then said could see Malaysians paying lesser than if the subsidy system was in place.
