A trend of continuously increasing budget deficits merely postpones the problems, says Mohamed Arshad Raji.
Prime Minister Muhyiddin Yassin has just announced a RM250bn “prihatin package”.
In the past week economists and corporate figures had urged the Perikatan Nasional government to take immediate actions before the economy crashes in the light of the current coronavirus pandemic.
Although the package has a nice-sounding name, many questions arise.
When the stimulus package was announced, many politicians and economists sang praises. The argument about the benefits through a multiplier effect is superficial, as many have forgotten the urgent need to root out extravagance, wastage and unproductive allocations.
They also forgot to ask the most pertinent question: where are funds coming from? Will it be through foreign borrowings, through higher taxes or from the sale of national assets?
How will the funds be disbursed, and will it be through politically connected agencies? What oversight will be in place to ensure that the funds are not misused?
The PN government when announcing the stimulus package did not provide immediately answers other than to project a feel-good atmosphere.
Patriot is concerned that if the execution of the disbursement of funds is not well carried out, the huge amount may turn into a gargantuan economic leakage.
There is no denying that an economic stimulus package is necessary at this juncture of the economic downturn, made more critical by the pandemic.
But the source of funds must be clearly planned and announced. It must not cause too much of a future burden to our people and nation.
As such, Patriot takes a neutral stand on this economic stimulus package. We would like to caution the government not to act hastily or to find the easy way out by selling key national assets.
Every important decision must be carefully thought out. Such a large amount of RM250bn should ideally be debated in Parliament before approval. We must uphold the principle of accountability. We must respect the role of checks and balances in Parliament.
Patriot would also like to caution that our national gold reserve must not be sold to raise funds for this stimulus package. We currently have 3.88 tonnes of gold and not a single ounce must be sold.
In the past, when discussing the national budget, we had urged the government to accumulate more gold. That was when the price was around $1,280 (RM5,540) per ounce and the price of crude oil was around $60 per barrel.
Today we would have been better off had our suggestion been taken seriously. Our frequent urging of politicians to focus on the economy and less on politicking has fallen on deaf ears.
As for imminent increase in the budget deficit to 4% of gross domestic product (GDP) due to the stimulus package, Patriot again would like to caution that a continuously increasing margin could be dangerous and unsustainable.
When the last national budget was announced, it was projected to be a deficit of 3.2% of GDP and, for subsequent years, the deficit would be reduced.
Instead of reducing, the deficit is now increasing. A large portion of our future budgets will have to be allocated for debt servicing. In the budget for this year, about RM35bn or 11.7% of the budget was allocated for debt servicing. Economically, this is unhealthy.
We are not faulting the government but merely cautioning. A trend of continuously increasing budget deficits postpones the problems, like sweeping the dirt under the carpet. There is no escape as problems like flocks can return to roost.
Future generations must not be made to inherit any current mismanagement of our economy.
Ultimately, whatever the amount, however the funds are disbursed, please be accountable and do not add burden to the people now and those of future generations.
Retired Brigadier-General Mohamed Arshad Raji is president of the National Patriots Association (Patriot)