Anwar under intense pressure to deliver the ‘perfect budget’

 

When Prime Minister cum Finance Minister Anwar Ibrahim tables Budget 2023 and delivers his budget speech today, he will be reprising a role he last played 26 years ago in 1997 as the then finance minister.

Having come a full circle, he will likely take satisfaction that he has finally reached the pinnacle of Malaysian politics and even bestowed upon himself the task of overseeing the country’s economy and financial health.

However, he will have little time to bask in the glory of his achievements. His decision to appoint himself as finance minister was not universally accepted both within and outside of the unity government.

In the run-up to the re-tabling of Budget 2023, it was rather amusing to see a host of industry groups, NGOs, SMEs, politicians, economists, analysts – you name it – dishing out their wish lists to Anwar, as if he had a magic wand.

The expectations of all these groups and individuals will ramp up the pressure on Anwar. In fact, all eyes will be on him to deliver the perfect budget – and we know that is an impossible task.

Some might argue his detractors may well be setting him up to fail. If that happens, it may be construed as a self-inflicted wound.

It is undeniable that by taking on the position of finance minister, he has heaped unnecessary pressure on himself. It’s a double-edged sword – if he outperforms as finance minister, he will reap the rewards. If he fumbles, he will have to deal with the repercussions.

His political opponents are hoping he delivers a damp squib of a budget, so they can hammer him with it.

There were already murmurings that Anwar had taken his eyes off the ball when he flew to Turkey last week to personally console Turkish President Recep Tayyip Erdogan and the Turkish people following the devastating earthquake which hit the country and neighbouring Syria.

An ‘election budget’?

In Malaysia, politics is invariably intertwined with business and economics. Past administrations have often leveraged the national budget as a political tool to gain favour with the people, and win elections.

That seems to have been the case with Budget 2023, which was tabled on Oct 7 last year under the Ismail Sabri Yaakob-led government. Three days later, Parliament was dissolved, paving the way for the 15th general election (GE15). The proposed budget, the largest in the country’s history, had various goodies for the ordinary folk.

Now that the second iteration of Budget 2023 has landed on Anwar’s lap, there is a high probability he will treat it as an “election budget” given that six states will have to dissolve their state assemblies in the next few months. The states are Selangor, Penang, Kelantan, Terengganu, Kedah and Negeri Sembilan.

Given that the original Budget 2023 already included various populist measures, Anwar may feel compelled to add even more.

That would be a serious mistake as any move that widens the budget deficit target of RM99.1 billion (5.5% of GDP) outlined in the original Budget 2023 would be pounced on by his critics.

On the contrary, Anwar, as a responsible finance minister, should be seeking to reduce the budget deficit to more manageable levels. For context, the budget deficit was only RM40.3 billion as recently as 2017.

This will entail a greater focus on prudence in government spending, and eradicating the endemic wastages, leakages, lack of transparency and accountability in government procurements and development projects that have plagued the public sector for so long.

Elephant in the room

Apart from the budget deficit, perhaps the biggest challenge Anwar has to deal with as finance minister is the government’s crippling RM1.5 trillion debt inclusive of liabilities.

The massive debt is a clear and present danger to the country and makes the economy susceptible to external shocks or crises.

The national debt has been steadily creeping up over the years, and was exacerbated by the Covid-19 pandemic when the government deployed various stimulus packages to support the economy.

To his credit, Anwar has acknowledged the national debt problem and has made some tentative attempts to reduce the huge subsidies bill for fuel and electricity such as power tariff hikes for multinational corporations.

However, more needs to be done, and Budget 2023 is a good place to start. The government will have to make some tough decisions, and the people may have to endure some pain for a better future.

Many economists have called for the return of the goods and services tax (GST), a broad-based consumption tax that will help fill up the nation’s coffers. However, Anwar has already ruled that out, at least for the time being.

This is something he will eventually need to revisit if he is really serious about tackling the nation’s debt problem.

Former second finance minister Johari Ghani hit the nail on the head when he said recently the country must brace for some short-term pain for the sake of future generations.

During a debate in Parliament last week, he underlined the importance of political stability, competence and trust in helping the country fix its struggling economy.

“We must have a government with integrity and credibility, so that the people, who will endure short-term pain, will trust us,” said Johari, who is the Titiwangsa MP.

As he unveils the budget this afternoon, Anwar will have the opportunity to show to the people he heads a government that not only knows how to fix the economy, but also has the political will and courage to do it.

If he is able to do that, he may well gain the trust of the nation. But given that politicians have the knack of kicking the can down the road, I’m not holding my breath. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.