PETALING JAYA: The Government’s Fiscal Policy Committee is to consider implementing measures to improve the country’s fiscal position that will include subsidy rationalisation, a Goods and Services Tax (GST) and a review of the real property gains tax (RPGT).
The committee, chaired by the Prime Minister and which includes officials from the Economic Planning Unit (EPU) and the Finance Ministry, will also look to tackle the narrowing current account surplus and carefully space out public sector projects to ease the impact on the national accounts.
In the meantime, Finance Minister II Datuk Seri Ahmad Husni Mohamad Hanadzlah said the Government was fully committed to continue BR1M (1Malaysia People’s Assistance) payments to the lower income groups.
“In the longer term, the Government plans to introduce a comprehensive social safety net for vulnerable groups which is targeted to be implemented in 2015,” he said in a statement.
He said the EPU had been tasked to lead a team to propose a social safety net system and that the Government would consider having a more targeted subsidy system instead of a blanket approach.
Slowing exports have hit the economy of late with the gross domestic product (GDP) for the second quarter of this year coming in at 4.3%.
Apart from weakness in the external sector, problems have also cropped up with imbalances in the property sector, high household debt and rising Government debt and fiscal deficit.
The Government said it was committed to ensuring that its debt did not exceed 55% of GDP, that its revenue exceeded operating expenditure and the fiscal deficit did not exceed 4% of GDP.
Husni said with the narrowing current account surplus, all future public sector projects would be considered carefully and also the current account position in the balance of payments.
“Projects that will have a big impact of public finances will be reviewed and sequenced properly to avoid excessive strain on the Federal Budget,” said Husni.
He added that to ensure money was spent wisely, an Outcome Based Budgeting will be introduced in a pilot programme at the Finance Minstry, Health Ministry and International Trade and Industry Ministry.
“Public sector projects with low import content and high multiplier effects will be given priority, without compromising economic growth,” he said.
Focus group discussions of improving exports and growing niche services have been conducted and the Government has received several ideas to be considered for Budget 2014.
It will look at ways to enhance Malaysia’s economic competitiveness and diversify the country’s export markets, especially in the logistics sector.
The Government will also look at beefing up the tourism sector with 2014 being Visit Malaysia Year and is targeting more direct exports of Malaysian agro-based products, such as bird’s nest and cut flowers.
AmResearch Sdn Bhd economist Patricia Oh said with a budget deficit target of 3% in 2015, the importance of having clarity on fiscal reforms was important.
“The Fitch sovereign credit outlook downgrade will have made this clear to the Government,” she said.
Oh, like other economists, believe that the Government remains under pressure where the introduction of measures on particular sources of revenue are concerned. “There may be a market reaction to certain measures, especially where property is concerned,” Oh said. - The Star
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