THERE are a few aspects of Tengku Zafrul Abdul Aziz’s 2021 Budget speech that I found disconcerting.

The first is that my wife and I are both going to receive one-off payments of RM300 each as we are government pensioners. Does the government have such a surplus of funds that it can reward people like us who have not suffered any loss of income? Shouldn’t finite government funds be focused on those whose incomes have been ravaged by the pandemic and the recession. The women working as daily paid helpers in restaurants, retrenched workers in hotels and tourism companies, stalls operators in pasar malam around the country, school canteen operators and others like them – these are the people whose lives have been upended by the pandemic. Some of them have problems putting food on the table. Shouldn’t they be the main recipients of government support?

Bantuan Prihatin Rakyat aid of RM1,800 per family with household income below RM2,500 per month will be of help to the people mentioned above, but it will not be enough. Families with a monthly income of less than RM1,000 per month will need a monthly cash transfer of RM500-1000 to be able to buy the basic necessities for themselves.

The finance minister does say in paragraph 9 of his speech that, above all, the government prioritises the protection of the citizens. Well, in a situation where the economic downturn has affected different sectors of the economy to different extents, shouldn’t the government be focusing more on the 700,000 families who are really struggling to make ends meet? Unless of course the real intention is to build goodwill and political capital in case an election has to be called a few months down the line.

The second point that I found very disconcerting came in paragraph 14 of the Honourable Minister’s speech where he says the government expects the economy to bounce back to a GDP growth rate of 6.5-7.5% next year. He goes on to say that the global GDP is expected to expand by 5.2% in 2021.

It will be great if his projections are correct, but given the fact that a safe and effective vaccine is still not at hand, and that it will take months for such a vaccine when it exists to be administered to populations across the world, the uncomfortable truth is that the Covid-aggravated recession is going to last for most of 2021 and perhaps even longer.

This raises the question of whether the ministry’s projections for federal government income for 2021 and the level of economic want in the population and the SME sector are premised on the minister’s over-optimistic expectations of GDP growth in 2021. If so, the deficit will be much larger than the 6% the minister announced.

The third disconcerting point is that the elephant in the room was not acknowledged at all – the source of funds. In a time of recession, government taxes will go down. Businesses make much less profits and the government gives tax breaks to stimulate aggregate demand. In the case of Malaysia, our returns from Petronas are already affected by the collapse in petroleum prices. We are already using 13% of our operating budget for debt servicing – paying the interest on the RM850 billion of government securities (MGS) that we floated in previous years. Relying on the market for all the deficit spending we need to do in 2021 will push up debt servicing costs too much.

PSM has previously proposed that debt monetisation be used to raise RM60 billion of the about RM190 billion that we need to borrow for 2021 – RM80 billion to roll over the MGS that are maturing in 2021, and the remainder RM110 billion for deficit spending in 2021. Debt monetisation refers to the selling of government bonds to the country’s own central bank at low interest rates. This is being done in several countries including Australia, India and Indonesia.

This budget session would have provided a good forum to debate the pros and cons of such an approach and to determine guidelines how debt monetisation could be deployed in the Malaysian context. Unfortunately the issue of where the funds are going to come from was not discussed in any detail by the Minister.

We are in unfamiliar territory. The minister himself acknowledges this in paragraphs 6 and 7 of his speech. Sadly his presentation focused on a myriad of programmes but did not broach the major issues. Well, our parliamentarians have two weeks to give their input. Hopefully they will bring to the floor the issues flagged above as well as other relevant issues . – November 7, 2020.

*Dr Jeyakumar Devaraj is Parti Sosialis Malaysia chairman.

* 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.