MPs were supplied with voluminous documents relating to the state of the economy. We were ploughing through the documents to analyse the management of the economy while Najib drone on waxing lyrical, poetic and at times, waxing sarcastic over his thematic budget. 2014 has another theme. The theme of the 2014 budget is \u201cSTRENGTHENING ECONOMIC RESILIENCE, ACCELERATING TRANSFORMATION AND FULFILLING PROMISES\u201d. If that makes him happy, so be it.<\/p>\n
Giving an artful theme to the budget does not make it a better budget. The devil is in the details.<\/p>\n
But where is the promise of giving RM1200 BR1M which he sold the voting public in last May\u2019s elections? Where is the promise to narrow the gap between the rich and the poor?<\/p>\n
Najib has reneged on this promise and stated poker-faced about paying out reduced BR1Ms. The scaled down BR1M handouts are downsized by the financial capacity of the government. Finally the chickens come home to roost. He has to face reality something the opposition MPs have warned continuously that out of control spending is bad for the economy.<\/p>\n
Public debt is now more than the 55 per cent legislated debt ceiling simply because this government hides the real debt by various tricks. Eventually the weight of public debt will come down crushing. In 2013 alone, the deficit incurred by some GLCs amounted to RM93billion. When opposition MPs say this budget is for the rich, it wasn\u2019t said out of spite. In 2013, the BR1M given to poor people amounted to RM7 billion. Compare this to the freedom given to some GLCs to overspend by RM93 billion. The people who should be grateful are not the ordinary rakyat but the BN politicians and their corporate conspirators for being able to hide from the rakyat the magnitude of their extravagance. They should be grateful the public hasn\u2019t turned on them yet. Maybe we should do a Louis and Marie Antoinette on them and that is not even Islamic law.<\/p>\n
In the coming days, we will dissect his budget. Apart from minor jeering, we did not steal the Finance Minister\u2019s thunder. We jeered only when he made political capital of certain portions of his presentation.<\/p>\n
Improving budget management<\/p>\n
The two most important things about a budget are to reduce the deficit and cut down public sector debt. Apply some common sense something the PM and his government has been preaching on. Spend within one\u2019s means. When giving out BR1Ms what was the pious message that he and his ministers gave? With this RM500, spend thee wisely. So why not as an example, the government applies this advice on themselves first spend wisely and spend within your means.<\/p>\n
How does this government plan to better manage the budget? It is now aiming to reduce fiscal deficit gradually achieving a balance budget by 2020. Well, the Pakatan Budget plans to achieve a surplus budget by 2018. BN is trying to get a balanced budget by 2020.<\/p>\n
What is the tactic? The tactic is to ensure public sector debt does not exceed 55 per cent of the legislated debt ceiling. It is lying to us. It has already breached this now. Official federal debt is now RM540-550 billion. If you add the deficit from GLCs which has gone beyond RM100 billion, then you end up probably with 650 billion. We can now safely assume public sector debt has reached 65 per cent of our GDP.<\/p>\n
Our economy is debt driven. This government fianc\u00e9s it Business Plan aka budget by taking on increasingly larger debts. Each year it tops up its spending money with borrowings. 2014, it will top up RM35-40 billion to make up for the insufficient revenue.
\nImagine this. If the interest charged on public debt is 4 per cent, on a debt of 650 billion, the government is paying RM26 billion a year servicing the debt.<\/p>\n
So the government manages its sources of deficit around the magical 55 per cent legislated debt ceiling. It looks at the sources of deficits and chooses the deficit-centres which have the weakest and least retaliatory voice expenditure on the uncoordinated rakyat. Take away subsidies from them under the grand sounding name of subsidy rationalisation. Although many, the voice of the rakyat is uncoordinated and they are not capable of mounting strong focused pressures unlike big businesses such as IPP, big monopolies and centres of crony capitalism. These are untouched.<\/p>\n
Take always sugar subsidy and the minister rationalise that as something good for the health, prevent diabetes etc. take way diesel and petrol subsidy the move is rationalised as preventing unqualified users benefiting from the subsidy. Taking away subsides from the rakyat is easier as they can\u2019t mount a forceful retaliation.<\/p>\n
Our energies are dictated by the near mythical figure of 55 per cent debt ceiling and so we take measures to circle around the figure. The government has a trick up its sleeves: it circles around this limit by allowing deficits that don\u2019t appear on the balance sheet and our national accounts \u2014 the debt and liabilities incurred and made by GLCs. Some of these GLCs are allowed to issue bonds guaranteed by the government because, they are in fact the government. So as long as the Big Spending government can argue that its spending is not beyond the 55 per cent limit, the economy is sound.<\/p>\n
This obsession of managing the debt ceiling is the main cause for the out of control spending. We don\u2019t control the spending, but focus instead of controlling the debt limit.<\/p>\n
To me this isn\u2019t right because it violates the basic principle of sound budgeting: spending within your means. By focussing on managing the debt ceiling, we give excessively large space for discretionary spending and the results are what we got as reported by the Auditor General\u2019s Report.<\/p>\n
How to make rectify this kind of spending? By setting rules instead of giving room for discretionary spending. It is because we allow in situ discretion, the little napoleons and stalins exploit their empowerment and did all sorts of funny business. If we retain that kind of spending regime, the 2014 Budget will be riddled with the same misdeeds.<\/p>\n
The government does not address this kind of deficit-causing centres. They don\u2019t plug corruption, they don\u2019t plug rent-seeking pricing of government purchases and they don\u2019t control project spending.<\/p>\n
So instead of making circles around the 55 per cent debt ceiling, why not we specify our budget as a specific percentage of our GDP and then make sure spending does not go beyond this percentage. How to select which percentage?<\/p>\n
Look at our economy for the last 10 years and identify which year our economy performed best. In that year what was the budget? For example during those years when our economy grew on an average of 8 per cent, what was the average budget? 22 per cent? If this was the budget in the best year, use 22 per cent as the limit.<\/p>\n
Make a rule that our budget from now on shall not be more than 22 per cent of our GDP. Then our budget is not made dependent on a near mythical figure of 55 per cent debt ceiling but is made a function of the GDP. Our energy will then be on the GDP i.e. on the economy as a whole.<\/p>\n
Once we set our budget as a rule, we adhere to it. For 2014 for example, our GDP is 1,100 billion. Using 22 per cent as the rule, our budget should be around RM220 billion. As our GDP grows, the budget grows too in line with the overall economy. Our focus isn\u2019t about ensuring federal debt level will remain low and not exceed 55 per cent of GDP. \u2014 sakmongkol.blogspot.com<\/p>\n
* Sakmongkol AK47 is the nom de guerre of Datuk Mohd Ariff Sabri. He is now the elected MP for Raub, Pahang.<\/p>\n","protected":false},"excerpt":{"rendered":"
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