Balanced budget not part of the government’s plan — Tok Pa

TheEdge Thu, Oct 14, 2021 02:18pm - 1 week ago View Original

KUALA LUMPUR (Oct 14): Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed said the government is not striving for a balanced budget, as “it is not the right thing for Malaysia”. 

He was speaking during a session at InvestMalaysia 2021 on Thursday on the opportunities and challenges of the 12th Malaysia Plan (12MP) which was moderated by Bursa Malaysia chairman Tan Sri Abdul Wahid Omar. 

The 12MP aims to see the fiscal deficit brought down to a range of 3% to 3.5% by 2025, which Mustapa said is a reasonable and achievable target. 

“By 2025, the target is to bring the budget deficit down to 3% to 3.5% of GDP (gross domestic product). A few years ago, the government was striving for a balanced budget. That is [now] not in the government’s planning as it is not the right thing for Malaysia. 

"But, the aim to reduce the deficit to 3% to 3.5% is possible to achieve. It is a modest ambition, compared to the earlier one of a [balanced] budget by a certain year,” he said. 

This year, the fiscal deficit is set to come in at 6.5% to 7% of GDP. 

The two were speaking about tax revenue, a hot topic that has been in discussion in recent months where Mustapa brought up the need for the country to diversify its revenue base to ensure sustainable development as well as fiscal sustainability. 

“Malaysians would love to have better public facilities, such as hospitals, schools — not just quantity-wise but in quality, while those in poorer states want better access to basic facilities. On one hand, we need to provide better facilities for people but on the other hand, revenue has not been expanding as fast. 

"Take a look at tax avoidance for example, the tax-to-GDP ratio of Malaysia, compared to our peers in the region, has been declining. This is something that is a cause of concern,” he said.

He added that revenue has not been keeping up with expenditure.

There are two ways to increase sources of revenue, he said. One way is to “tighten up the tax machinery”, meaning make collection more efficient, which is a continuous process for the government. 

The next is to diversify the revenue base. 

“It is work in progress, but it is important in the context of sustainable development and fiscal sustainability. 

"It is important for us to broaden our revenue base. But as we have said before, now is not an opportune time to do so, as the nation is still in crisis mode, but there will come a time when we have to revisit the issue, because it's simply not sustainable,” explained Mustapa. 

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