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Govt to strengthen economic policies

pm 2

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.”


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