Malaysia’s Finance Minister: GST for the Better?
As the Minister of Finance, Zafrul stresses that fiscal reforms are imminent for increasing expenses. The COVID-19 pandemic heavily dampened the government’s revenue; he notes that Malaysia’s direct burden is about to exceed RM1 trillion in 2022. Therefore, requiring more productive debt-paying to sustain the slow economic growth.
Almost RM50 out of every RM100 that the government earns goes to cover civil servants’ salaries and public pension obligations, Zafrul adds. He mentioned that there might be a need for a supplementary budget for the recent floods operation and the subsequent flood-relive programmes. Clearly, the government is exhibiting unmissable signs of needing more money.
The Finance Minister fully supports the GST reimplementation – as soon as the economy bounces back. He mentions that had the government kept GST instead of SST, and the government would have made an additional RM20 billion. Consequently, the change could be remunerative for the country’s development, along with other pivotal expenses. The Minister, an ex-banker and investor, states that he is in favour of the subsidies. However, with the condition that it needs to be targeted. Zafrul added that if the GST is reimplemented, the lower-income group would be provided targeted aid to cushion the impact.
According to the Minister, even during the pre-pandemic days, Malaysia was close to spending 99% of revenue on operating expenses. Hence, when the pandemic hit, it was no surprise that Malaysia had to borrow money in order to cover operating expenses. In light of the recent events, the government needs to expand and diversify the country’s revenue sources to earn better.
Zafrul agrees that tougher fiscal reforms are an unpopular idea. Nevertheless, it has to occur to ensure overall fiscal sustainability, all the more with the given current situation. The government aims to introduce the Fiscal Responsibility Act later his year. It sets to improve the country’s governance and transparency in terms of fiscal management and sustainability.
Zafrul’s fiscal reforms, mainly on targeted subsidies and implementing the GST again, are more of a matter of execution, as it is not a form of new solutions. The Minister believes that fiscal policies do not have to wait post the 25th general election, GE15, much less if the economy already is on track to rebound.
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