FISCAL REFORMS: Details of various policy options will be unveiled in budget, says PM
KUALA LUMPUR: THE government will unveil a number of policies in the 2014 Budget to strengthen the country’s fiscal and macro-economic position, Prime Minister Datuk Seri Najib Razak said yesterday.
Responding to the downgrading of the country’s sovereign credit rating from stable to negative by Fitch Ratings on Wednesday, he said the government shared the rating agency’s concerns on fiscal reforms.
“We are looking at various policy options and the details will be unveiled shortly in the forthcoming budget,” he said, pointing out that the government had set up a fiscal committee to look at some of the challenges.
The 2014 Budget will be tabled in Parliament on Oct 25.
Najib, who is also finance minister, said the revision by Fitch Ratings was only with regard to its outlook and the rating agency has “reaffirmed our current rating and this is something positive”.
Najib said this after launching the new iconic brand identity for Malaysia as the world’s Islamic Finance Marketplace here yesterday. Present were Bank Negara Malaysia governor Tan Sri Zeti Akhtar Aziz and Finance Minister II Datuk Seri Ahmad Husni Mohamad Hanadzlah.
In his speech, Najib said Bank Negara had put forward a number of proposals to strengthen Malaysia’s economic resilience and accelerate the government transformation programme.
Zeti later said Malaysia had the capacity to address the fiscal concerns in a gradual manner.
She said both the central bank and government had been addressing the issues.
Zeti said Fitch was just doing its job as a rating agency and its concerns would be addressed in the coming budget.
“Malaysia still has time to do it. Of course it is now more urgent because the global environment has become more challenging as the recovery that we expected from major economies has not strengthened.”
Zeti added that it was important for Malaysia to reduce its vulnerability to these challenges, including implementing fiscal reforms going forward.
Fitch, in its ratings, said Malaysia’s public finances were its key rating weakness and cautioned that the situation could be mitigated if reforms and remedial measures were carried out.
Alliance Research chief economist Manokaran Mottain, when contacted by Business Times, said there was an expectation that the government would announce some reforms after the general election but these have yet to materialise.
He added that Malaysians were waiting for announcements on subsidy rationalisation and the goods and services tax (GST), the latter, he felt must not be delayed.
Manokaran said with the volatility of the external environment and likelihood that Malaysia might not achieve its gross domestic product target of five to six per cent growth this year, addressing deficit concerns would be more challenging.
“We need fiscal reforms soon, maybe via operating expenditure or expanding the revenue base. It may not be a good time to trim government expenditure but we must look at ways of trimming the operating expenditure of the government,” he said.
RAM Holdings group chief economist Dr Yeah Kim Leng said a rating downgrade could be averted if the government commenced with structural reforms to rein in the fiscal deficit and government debt level by cutting back spending, rationalise subsidies and roll out GST.
“We believe the country’s financial and economic conditions will make it quite easy for the government to implement the fiscal reforms over the next one to two years to avert the rating downgrade.”