The minister’s Budget 2021 presentation focused on a myriad of programmes but did not broach the major issues that affect low-income households, Jeyakumar Devaraj writes.
There are a few aspects of Tengku Zafrul Aziz’s Budget 2021 speech I found disconcerting.
Building political capital?
The first was that my wife and I are both going to receive one-off payments of RM300 each as we are government pensioners. Does the government have a surplus of funds such that it can reward people like us who have not suffered any loss in income?
Shouldn’t finite government funds be focused on those whose income has been ravaged by the pandemic and the recession? The women working as daily paid helpers in restaurants, retrenched workers from hotels and tourism companies, stall operators in the night bazaars (pasar malam) around the country, school canteen operators and others like them – these are the people whose life has been upended by the pandemic. Some of them are facing problems putting food on the table. Shouldn’t they be the main recipients of government support?
The Bantuan Prihatin Rakyat (People’s Caring Aid) of RM1,800 for families with a monthly household income below RM2,500 will help the groups mentioned above, but it will not be enough. Families with a monthly income of less than RM1,000 will need a monthly cash transfer of RM500-RM1,000 to cover their basic necessities.
The minister does say [in the ninth paragraph of his speech] that the government prioritises the protection of citizens. Well, in a situation where the economic downturn has hit different sectors of the economy to varying degrees, shouldn’t the government be focusing more on the 700,000 families who are struggling to make ends meet? Unless, of course, the real intention is to build goodwill and political capital in case an election has to be called within a few months.
The second point I found disconcerting came in the 14th paragraph of the minister’s speech. He said the government expects the economy to bounce back to 6.5%-7.5% GDP growth next year. He add that global GDP is expected to expand by 5.2% in 2021.
It would be great if his projections are correct, but given that a safe and effective vaccine is still not available and that it would take months for such a vaccine to be administered to people across the world, the uncomfortable truth is that the pandemic-aggravated recession is going to last for most of 2021 and perhaps even beyond.
This raises the question of whether the ministry’s projections of federal government income for 2021 and the level of economic want in the population and in the small and medium-sized enterprises sector is premised on the minister’s overoptimistic expectations of GDP growth in 2021. If so, the deficit will be much larger than the 6% the minister announced.
Where are the funds coming from?
The third disconcerting point is that the elephant in the room was not acknowledged at all – the source of funds. In a time of recession, government taxes will go down – businesses make much less profits and the government gives tax breaks to stimulate aggregate demand.
In the case of Malaysia, our returns from Petronas have already dropped due to the collapse in petroleum prices. We are already using 13% of our operating budget for debt servicing – paying interest on the RM850bn of government securities we floated in previous years. Relying on the market for all the deficit spending we need to do in 2021 would push up debt servicing costs too much.
The Socialist Party of Malaysia (PSM) has proposed previously that debt monetisation be used to raise RM60bn out of the total of about RM190bn that we need to borrow for 2021 – RM80bn to roll over the government securities that are maturing in 2021 and the remaining RM110bn for deficit spending in 2021. Debt monetisation refers to the selling of government bonds to the country’s own central bank at low interest rates. This is being done in several countries including Australia, India and Indonesia.
This Budget session would have provided a good forum to debate the pros and cons of such an approach and to determine guidelines on how debt monetisation could be deployed in the Malaysian context. Unfortunately, the minister did not discuss in any detail where the funds will come from.
We are in unfamiliar territory. The minister himself acknowledged this in the sixth and seventh paragraphs of his speech. Sadly, his presentation focused on a myriad of programmes but did not broach the major issues.
Our parliamentarians have two weeks to give their input. Hopefully they will bring the issues flagged above as well as other relevant issues to the floor.