KUALA LUMPUR (Oct 11): The Dewan Rakyat has passed the Public Finance and Fiscal Responsibility Bill, which entails a timeline of up to five years to meet several fiscal targets including a ceiling on federal government debt and guarantees, fiscal deficits and a floor on development expenditure.
The Bill was passed via a voice vote after a total of 18 members of Parliament debated it during the second reading of the Bill, which was tabled by Deputy Finance Minister I Datuk Seri Ahmad Maslan [BN-Pontian].
The Bill sets a number of targets including development expenditure of not less than 3% of gross domestic product (GDP), fiscal deficit to GDP of 3% or less, federal government debt to GDP of 60% or less, and government guarantee to GDP of 25% or less.
Touching on the high government guarantee ceiling — totalling 17.8% of GDP last year — Ahmad said the gap will provide room for the government to ensure the delivery of large scale infrastructure projects in the future.
The debate also saw questions raised on situations that warrant the government undertaking temporary divergence from the targets in abnormal situations such as a pandemic.
Ahmad said that if such a situation occurs early within the five-year time frame, there will be no need for divergence if the government is confident of meeting the targets in the medium term.
Under Section 26 of the Bill, to diverge from the targets, the finance minister must conduct a study on the significance of the impact of the situation, after which the assessment needs to be tabled to the Cabinet.
The minister must then table a fiscal adjustment plan to the Cabinet for approval, containing the reason for the divergence and the quantum involved, as well as steps to realign and the subsequent targets, and the timeline involved.
As stated in the Bill, after Cabinet approval, the plan must then be tabled to the Dewan Rakyat for another approval.
Malaysia’s annual development expenditure has averaged 4% of GDP since 2015. Fiscal deficit to GDP is estimated at 5% for 2023. Government debt, meanwhile, stood at 60.4% of GDP in 2022, and government guarantees at 17.8%.
Questions were also raised about the composition of a fiscal policy committee responsible for proposing recommendations to the Cabinet on government fiscal policy matters, as the committee, which comprises several ministers and secretary generals of the respective ministries, Bank Negara Malaysia governor, and a maximum of two appointees, does not make the appointment of opposition MPs compulsory.
The Bill also lacks details on the appointment methods of a separate small committee “to analyse the fiscal risk, and risk of debt and other liabilities to the government”, other than it can be appointed by the fiscal policy committee.
To this, Ahmad said the Finance Ministry accepts the recommendations, and said such matters could be addressed in future amendments.
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