BEING the first federal budget falling within the five-year period of the 12th Malaysia Plan (12MP), the upcoming Budget 2022 is hoped to put more focus on longer-term planning instead of short-term exercises.
Research for Social Advancement (REFSA) economic advisor Frederik Paulus and researcher Lilian Wee believes that Budget 2022 will be an opportunity for the Government to shift its gears by introducing multi-year plans in different ministries.
“It’s important to shape Malaysia’s post-pandemic recovery by driving concrete measures and policies to address the nation’s economic needs such as reforming the labour market and building a comprehensive national social safety net,” they opined.
In its pre-Budget statement, REFSA highlighted several key areas that the Government should prioritise on while maintaining an expansionary budget, implement productive measures to control expenditure and grow the nation’s revenue.
Some of them include:
- Support vulnerable groups, especially women
During the pandemic, the women labour force participation dropped 55.4% in 1Q 2021, making it crucial for the upcoming budget to be gender-responsive and ensures dynamic resource allocation policy designs are sensitive to the budgetary impact towards men and women. - Support for business
Unlike previous support packages announced during the pandemic, the Budget should aim for larger but better targeted support to businesses that need it. Outright cash support could be part of a policy mix that also includes soft loans extended by financial institutions, complemented with government guarantees. - Increase spending on healthcare
According to World Bank data, Malaysia’s 2018 total healthcare spending (public and private) relative to the country’s gross domestic product (GDP) was 3.8%, which is lower than the 6.8% seen among upper-middle income countries in the same year. The need to raise the spending level is all the more important given Malaysia’s ageing demographic profile. - Increase spending on education
The Government must provide greater funding to the education sector, particularly from preschools to secondary schools, to catch-up with lost time and ensure better learning outcomes. Investment should also be made to enable face-to-face learning during the pandemic. - Increasing revenue
It is prudent to start laying the foundation for greater revenue collection for 5-10 years down the road, as there is now a risk of a near-term implosion in operating expenses. Once the COVID-19 special bills run out, such expenses will have to reduce proportionately given Government borrowings are legally allowed to finance development expenditure only. Furthermore, debt service payments are also expected to increase because of the large amounts of borrowing, reducing the room for manoeuvre in operating expenses.
Remediating the continued impact of the pandemic, Paulus and Wee believes that the Budget 2022 should aim to include steps to the future direction of the economy, keeping a balance between short- and long-term policy considerations. – Oct 27, 2021
