FINANCE Minister Tengku  Zafrul Abdul Aziz’s interview yesterday about our capacity to fund the stimulus packages is most welcome, assuring and timely.  

Most Malaysians had wondered how the government  will finance the RM260 billion Prihatin and RM35 billion Penjana  packages. Can we afford  all these  necessary but, perhaps, insufficient subsidies?

Depending on how long the Covid-19 outbreak will last, despite the heroic undertakings of government and front-liners, with the people`s support, will the government coffers be able to sustain the strains imposed on a widening budget deficit?

Thankfully, the finance minister said  the budget deficit will be allowed to grow to about 6% this  year, from an estimated  3.4% projected in Budget 2020.

These bigger deficits  are  inevitable if we are to overcome this crisis. The national debt will also increase, but the government will prudentially focus on domestic borrowing and not on foreign debt, which could put pressure on our balance of payments.

Avoid  a financial crisis

We have already Covid-19 and economic  crises, so  let’s be careful  to avoid a financial one  as well?

If our deficit and debt rise too high, there can be a financial crisis as well. This is a threat and likelihood that we cannot afford.

Hence, we have to carefully check the following:

Monitor the rising deficit closely. We can easily lose sight of the  rising deficit is we are under  too much pressure to  grant more and more subsidies. We will need periodic reports  to keep track of the deficit. 

Where the government cannot afford to do much more, we must let the private   sector expand its business activities without too much protectionism. Some old restrictive business policies, and quotas, licenses,  approved permits, old rules and regulations etc. need to be reviewed, revised and reformed to enable the true businesses to  emerge and expand. 

Government-linked companies must be prepared to accept more competition to benefit the people and economy.

We have to develop a new economic model that can serve the country and our people more productively. We have to push harder to get into the digital economy. We must follow the new normal more diligently and expeditiously.

Our brian drain must be reduced drastically, by removing policy constraints, in order to enrich our own resources and capacity  to attract more foreign investment  and  higher levels of  technology.

With the large expenditures approved to stimulate the economy, we have to watch out for a possible increase in corruption and leakages.

The income disparities that are causing so much misery in the United States and all over the world, must be avoided in Malaysia. The present stimulus packages can be extended to the poor, many of whom can’t have a decent meal, even in relatively wealthy Malaysia.

The government must be commended  for doing  well to counter Covid-19 and its adverse effects on the economy.

However, the budget deficit must be checked closely to maintain and strengthen the  budget’s integrity.

For the recovery stage there has to be  more concrete reforms to adjust to the new normals developing worldwide, to build a better Malaysia. – June 9, 2020.

* Ramon Navaratnam reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.