Beware of Fitch’s fiscal warning — Ramon Navaratnam

International ratings agency Fitch Ratings has once again warned Malaysia that its public finances are under sustained strain! 

This firm but polite expression of censure, if not admonition, should not be played down by unduly highlighting Malaysia’s short-term good economic growth gains in the last two quarters of this year . 

Neither should we be complacent about the serious declines in economic growth and stability occurring currently in the relatively rich developed industrial world. We can do this only at our own peril. 

The fact of the matter is that Malaysia will be adversely affected by the global slowdown in the near future. The extent of our economic slide is difficult to project at this time. But we know for sure that we cannot take a “business as usual” attitude against the headwinds and strong disruptive socio-economic currents whirling around us, at home and from abroad. 

Thus we have to safeguard the economy against increasing strains on our national “credit profile”. This means, in short, exercising more fiscal discipline to restrain our high budget deficits and the budget and national debt from growing big and bad. 

Budget 2013, to be tabled in Parliament next month, must therefore ensure that the necessary budget fiscal and monetary measures are adopted to strengthen our economic foundation and the fiscal reforms relating to better management of budget revenues, expenditures, the national debt and balance of payments, in the face of the inevitable global economic slowdown 

Budget 2013 must therefore clearly show that it has taken Fitch’s fiscal warning seriously or Malaysia will have to pay penalties now being experienced by many developed countries! 

We believe 2013 Budget should and will accordingly be designed appropriately. 

* Tan Sri Ramon Navaratnam is chairman of the Asli Centre of Public Policy Studies.