KUALA LUMPUR, Oct 31 — With just a matter of days until Budget 2021 is tabled in Parliament, Datuk Seri Mohamad Hasan has urged the government to temporarily forgo goals of decreasing the country’s fiscal deficits and instead focus on short term spending to stimulate the economy.
The Umno deputy president asserted that the government should look into an expansive budget to save the jobs, businesses and small traders who have been badly affected by the pandemic.
“This is the time the government double down on efforts and aid stimuli using a targeted approach towards groups most badly affected.
“We cannot let the people continue to languish, for businesses to close down forever and the country’s economy to suffer and be trapped under irreversible damage,” he wrote in a statement today.
As such, he pushed for a budget that centred around the humanitarian angle, advising the government to take on loans from local financial institutions to avoid the economy experiencing a K-curve recovery pattern.
The K-curve, or Kuznets Curve, is an economic theory thought of by Simon Kuznets, A Nobel Prize winning Russian-American economist well known for his work on economic growth patterns.
Mohamad suggested that Malaysia would likely experience an economic recovery pattern consistent with the principles of the K-curve, which is used to describe economic recovery that charts a rise for certain industries, and subsequent decline for others.
He said the effects of the K-curve would then be very evident in society if the current pattern of movement control orders being enforced continues without a clear end in sight, not so much on the more affluent, but affecting more within the bottom 40 per cent (B40) and middle 40 per cent (M40) income groups.
Mohamad also suggested the government ditch the narrative of aiming to reduce their fiscal deficit, saying the nation’s debt can be dealt with later with the survival and well-being of the people as the budget’s main priority.
He asserted how the government could take on loans from these local banks to give interest to the local bond market, especially through the Malaysian Government Securities and Malaysian Government Investment Issues programmes.
“Taking out local loans will not leave a negative effect on the economy considering Malaysia would not be tied to foreign regulations, as compared to the strict rules from institutions like the International Monetary Fund (IMF).
“Additionally, these local loans would be less exposed to risk of fluctuating interest rates on foreign currencies or the risk of depreciating currencies because these debts would be in the denominated in ringgit,” he wrote.
Mohamed said the government should halt their focus on achieving fiscal consolidation until at least 2022, with the hopes of the economy having fully recovered by then.
“However, the strategy to boost expenditure and stimuli in Budget 2021 is not a ‘blank cheque’ for the government to spend wastefully.
“Government expenditures must be planned and executed with the fullest amount of accountability and transparency, with a determination to avoid and deter any form of leakages.
Mohamad added how the temporary increase in government debt to accommodate the added expenditure is necessary to ensure their goals of saving the country and restore the livelihoods of the people.
Prime Minister Tan Sri Muhyiddin Yassin earlier today pleaded with all Opposition MPs to approve his Budget 2021 to be tabled in Parliament on November 6, saying it would will provide for everyone amid the economic downturn caused by Covid-19, with an emphasis on the frontliners and those suffering from the recent rise in cases.
Prior to that, former finance minister Lim Guan Eng had urged Muhyiddin to ensure the government’s financial focus should shift from controlling Malaysia’s debt levels and fiscal deficit to borrowing more money.
He said the obsession with controlling the deficit to protect the country’s sovereign credit ratings must give way to borrowing more money to save Malaysian jobs, businesses and livelihood.