PM’s 3% or lower fiscal deficit target challenging, says economist

 

Prime Minister Anwar Ibrahim launched his vision of a new Madani economy on July 27.

PETALING JAYA: Prime Minister Anwar Ibrahim’s government faces an uphill battle in its bid to achieve a fiscal deficit target of 3% or lower within the next 10 years, said an economist.

“With the government’s current expenditure patterns, I think keeping the deficit at 3% will be very challenging,” said Universiti Malaya’s Nazari Ismail.

He cited the government’s pledge to issue up to RM1 billion in sukuk to Felda annually over the next decade as well as RM100 e-wallet credits promised to Malaysian adults earning below RM100,000 annually as reasons why the target may not be attainable.

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The 3% or lower target is one of seven medium-term benchmarks set by Anwar in his vision of a new Madani economy on July 27. The targets are to be achieved within the next 10 years.

Meanwhile, Barjoyai Bardai of Universiti Tun Abdul Razak said the country would be able to achieve a balanced budget in the short term if all government subsidies and direct cash assistance to the people were removed.

“But the (thing) is, we cannot abolish all those immediately,” he told FMT.

He said Putrajaya should establish an independent income generating entity to provide the people assistance in place of annual government subsidies. In 2022, the government spent an estimated RM80 billion in subsidies.

“For example, we should start a social protection institution. We should invest and transfer some of the government’s wealth into it. That institution (can) be run independently, just like EPF,” he said.

Barjoyai said the institution could be set up to generate sufficient income within the 10-year timeframe. In any case, even if its goals were not fully achieved the country would still be moving in the right direction, he said.

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Barjoyai also believes Anwar’s target for Malaysia to be one of the 30 largest economies globally within the next decade is not out of reach.

“Based on the GDP in US dollars, we are actually at number 32. If we just want to be within the (largest) 30 economies in the world, that is very easy,” said Barjoyai.

Nazari, however, warned that the race to become among the largest economies in the world may see the country burdened by a higher level of indebtedness and a soaring cost of living.

“The US (for example) is the largest economy in the world, but more than 15% (of its population) are poor, and an estimated 582,000 Americans are homeless,” he added.

Both economists said the government would need to work hard to attract foreign investment, upskill workers and invest heavily in technology in order to achieve the Madani economy goals of reaching the top 12 on the global competitiveness index and for labour income to make up 45% of its total income.

Ultimately the government must put solid strategies on human capital development in place to achieve the seven benchmarks, said Barjoyai. - FMT