KUALA LUMPUR (Nov 27): Budget 2021 was formulated with a balancing act in mind, a treasury official said today, adding that it is important for the government to spend on development expenditure to stimulate new growth in the country.
“There were some quarters who asked why the budget was not more expansionary. This is part of the balancing act that the Ministry of Finance (MoF) is faced with,” said Johan Mahmood Merican, the director of the National Budget Office.
“The economic situation remains quite dynamic, and the government will continue to monitor the situation. The focus is on how we can learn to live with Covid-19 and at the same time contain any outbreak of clusters, but balance it by letting the economy [move forward],” Johan said in his keynote address at a post budget debate webinar organised by the Malaysian Economic Association.
He said the MoF applied a balancing act when planning the budget, taking into account both immediate and long-term considerations.
“That applies to the EPF (Employees Provident Fund) Account 1 decision, for example, where we had to consider immediate needs of those who lost their jobs against their post retirement savings. It’s about maintaining a balance between assisting the affected against stimulating new growth,” he said.
Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said in his winding-up speech on Budget 2021 in Dewan Rakyat yesterday that the government will expand the EPF's i-Sinar facility to include all members whose income was affected due to the Covid-19 pandemic.
The cap on the advance taken up by members with savings of RM90,000 or below has now been raised to RM10,000, instead of RM9,000 or 10% of the account balance as announced in the national budget on Nov 6, a move expected to enable eight million contributors to tap on their EPF Account 1.
Johan, in his address, said that while it is important to assist those affected during this difficult period, the government must also at the same time continue to stimulate growth for the country.
“It was interesting that in the parliamentary debate, Datuk Seri Anwar Ibrahim as the head of the opposition was saying that we should use the increase in development expenditure towards giving more assistance,” he said.
“For 2020, we expect a development expenditure of RM50 billion, whereas in 2021, we are allocating RM69 billion, so that’s a significant increase.
“In terms of increasing assistance, we are doing that. The allocation to Bantuan Sara Hidup (BSH) and Bantuan Prihatin Nasional (BPN) in 2020 combined come up to RM21 billion.
“Next year, there’s the RM6.5 billion Bantuan Prihatin Rakyat plus the balance RM2.2 billion of BPN to be paid in January, so there’s RM8 billion there and double of what we have given before,” he added.
The government, therefore, feels it is already putting aside a lot money to assist the affected people, Johan explained, saying: “It’s important that we invest in development expenditure to stimulate new growth.
“The government will need to provide more leadership at a time when the private sector may be dampened. It would look towards the government to stimulate growth,” he said.
On the country’s fiscal deficit, Johan said the government had attempted to undertake fiscal consolidation despite the current economic scenario.
“I know there are many out there who are saying we should just completely forget about trying to have a target for the fiscal deficit and just borrow as much as possible. That’s become very popular among many economic commentators out there.
“I think we are still concerned, and still aspire to try and maintain our credit rating if we can, because we feel there are much broader implications for the economy and the people as a whole.
“On one hand, we’ve pushed for the largest-ever expenditure of RM322.5 billion for 2021, but at the same still try to show that there is moderation in the deficit from 6% to 5.4% of GDP (gross domestic product) next year to show some attempt to do fiscal consolidation despite the current scenario,” said Johan.