KUALA LUMPUR (Oct 10): The government should provide details on how the proposed fiscal responsibility legislation will be enforced when a government guarantee is given to government-linked companies, said government lawmaker and former health minister Datuk Seri Dzulkefly Ahmad (PH-Kuala Selangor).

Speaking in the Dewan Rakyat when debating the Public Finance and Fiscal Responsibility Bill 2023, Dzulkefly also called for a bigger role for the Parliament to counterbalance the implementation of the proposed legislation by the executive body.

Citing an example of the recent RM2 billion government guarantee given for the Armed Forces Fund Board’s (LTAT) takeover of Boustead Plantations Bhd, Dzulkefly asked if the decision on the guarantee would have been different if the fiscal responsibility legislation was already in place. 

"And what would be the difference? That is where, the membership of [the parties responsible to enforce] the Fiscal Responsibility Act, I do not feel is independent enough,” Dzulkefly said.

“For the most part [it falls on the purview] of the executive. What is the role of the legislative [body]? Maybe it could be considered, is it warranted for us to form a special parliamentary select committee only for the agenda of government fiscal policy?

“This is so that the government backbenchers and the opposition bench can act in a bi-partisan manner, such as in the education ministry, as a check and balance on the front bench, namely the Cabinet and especially the Ministry of Finance,” he said.

Dzulkefly noted that the government guarantee ceiling of 25% of gross domestic product (GDP) is not a small amount, which is almost RM425 billion based on a GDP value of RM1.7 trillion.

“If we are committed to provide government guarantees of 25% for this off-balance sheet item, what may be observed by the rating agencies is a commitment for fiscal discipline — where we set the quantum of debt service charges to GDP — that is not there,” he added.

The Bill, which was given its second reading in the afternoon, provides for a development expenditure target of 4% of GDP; a fiscal deficit target of 3% of GDP; a federal government debt ceiling of 60% of GDP; and the capping of government guarantees at 25% of GDP — all within a three-to-five year period.

Under the Bill, no government guarantee can be provided unless if: a) the guarantee is in line with fiscal management principles in the act; b) the terms and conditions of the guarantee is in line with the guidelines or government policies; and c) the amount does not exceed 25% of GDP.

It, however, did not mention the amount of guarantee allowed for any one government agency.

Malaysia’s annual development expenditure averaged at 4% of GDP since 2015. Fiscal deficit, as measured against the GDP, is estimated at 5% for 2023. Government debt, meanwhile, stood at 60.4% of GDP in 2022, whereas government guarantee totalled 17.8% of Malaysia’s 2022 GDP.

The proposed Fiscal Responsibility Bill does not penalise the minister of finance should the federal government's fiscal targets are not achieved. However, a remedial plan will be required to be tabled to the Parliament for approval.

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