KUALA LUMPUR, July 19 — Malaysia has not been too cautious or bold with its direct fiscal injections, as the government is prepared to increase fiscal space should the need to support the national economy and the rakyat arise, said Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz.
In an interview with South China Morning Post, he said the highest ever deficit in the country was from 2008 to 2009, when it stood between 6.7 to 6.9 per cent.
“Even during the Parliament session last year, I announced that the deficit target will be around 5.4 per cent. And in February, I announced again it will be six per cent.
“With the recent stimulus packages that we have announced, I believe the deficit will go up to 6.5 to seven per cent. So it shows the government is ready to increase fiscal space,” he said.
When asked if he was taking an incrementalist approach with regards to the direct fiscal injection, in light of the complaints from certain quarters that it is too low and that more can be borrowed, Tengku Zafrul said it is necessary to take a holistic view and take into account Malaysia’s present fiscal position.
“Today we have a deficit that is going to reach seven per cent. It is also not about the size of the deficit, but the ability to borrow and the size of the reserves.
“So Malaysia as you know, although we are A-rated, we in terms of our fiscal reserves we are smaller than many other A-rated countries. The only difference is that we have strong growth prospects,” he said.
The minister said that looking at where the country stands today, the administration also taps into other parts of the government’s ecosystem.
“We get assistance from Bank Negara Malaysia, the Employees Provident Fund, the banks giving moratorium. If you look at the moratorium that we have offered to Malaysians today, both private and companies, you cannot get it anywhere in the world as it is so streamlined and so focused. We have a strategy there.
“At the end of the day, what is important is whether it is adequate and I feel that what support the government has provided, given the fiscal constraints that we have, is adequate. You must also look at our debt service coverage ratio and you must also look at the liquidity of the domestic institutions today,” he said.
Tengku Zafrul also said he does not believe the recent Bendera Putih campaign, where those in need of supplies at home place white flags in front of their residences, is an indication that Putrajaya’s stimulus packages are ineffective.
“If we look at this, we have addressed some of those issues by ensuring that all the elected representatives are given allocations to support their constituency.
“In fact the government has itself launched a food programme and has been with all segments of society, the NGOs, the opposition, because it is tough times and you must remember there will be pockets of our community, especially the vulnerable segment of society, that still need help,” he said.
Adding that the government will focus on that, Tengku Zafrul said the government has provided RM10 billion in fiscal injection, which will serve as cash support directly to Malaysians.
“We have seen 5.8 million Malaysians receive this aid. I am not saying that there might be pockets of people who we may miss out but we are there to learn from our mistakes and make sure that everyone does get the support that is required,” he said.
