KUALA LUMPUR, Oct 11 — With the passing of the Public Finance and Fiscal Responsibility Act, the country will for the first time in history have an Act related to fiscal policy management, to ensure the sustainability of public finances, preserve macroeconomic stability and protect the well-being of the people.
Deputy Finance Minister I Datuk Seri Ahmad Maslan said the proposed Act contains clear fiscal objectives and targets to be achieved by the government in the medium term.
“In addition, this proposed Act emphasises the accountability of the finance minister to Parliament in managing public fiscal and financial policy.
“The enactment of this Act reflects the government’s commitment to improve governance, accountability and transparency in the management of the country’s fiscal policy,” Ahmad told Parliament today.
He added that this Act will open a new chapter in promoting the country’s fiscal reform agenda.
Under Clause 5 of the Act, the minister is responsible for formulating and implementing the fiscal policy of the government with the objectives of ensuring sustainability of public finance, preserving macroeconomic stability and safeguarding the well-being of the people.
The Act will also ensure that the minister formulates a Medium Term Fiscal Framework to guide fiscal planning, strategies and priorities over a three to five year period.
However, the Act has also outlined the fiscal objectives the government needs to achieve.
Among them are the annual development expenditure incurred as a percentage of gross domestic product should not be more than 3 per cent; fiscal deficit should not be more than 3 per cent; debt level as a percentage of gross domestic product should not be 60 per cent; and financial guarantee as a percentage of gross domestic product should not be more than 25 per cent.
Should the government fail to meet the targets, Clause 26 allows the government to temporarily deviate from the fiscal objectives upon the occurrence of a sudden and unpredictable event that may pose significant risks to human life, economy and fiscal position.
Under the Clause, the minister shall, prior to the deviation from the fiscal objectives, carry out an assessment to determine whether such event will cause a significant economic crisis, health crisis or affect the fiscal position of the government.
This clause further provides that the minister should table the assessment made to the Cabinet for approval.
If the Cabinet is satisfied with the assessment tabled by the minister, the minister will then prepare and table a fiscal adjustment plan to the Cabinet for approval.
If the Cabinet approves the fiscal adjustment plan tabled by the minister, the minister may proceed to present the fiscal adjustment plan at the next meeting of the Dewan Rakyat.
