Budget 2015 will be presented today by Prime Minister Datuk Seri Najib Tun Razak at the Dewan Rakyat.
As specific economic terms and phrases are usually used to describe
salient details of the budget, it is pertinent for the layman to
understand what they mean.
In an interview with Bernama, economist Prof. Datuk Dr.Amir Hussin
Baharuddin, who is also a lecturer at Universiti Utara Malaysia’s Centre
for Economics, Finance and Banking Studies, explains the terms commonly
used in a budget presentation.
Q: What is the national budget?
A: The term national budget refers to the
government’s expenditure plan and collection of revenue, taxes and
duties, and how this money is utilised to carry out projects and
development programmes for the people. The government presents the
budget once a year and it covers each fiscal year, which begins on Jan
15 and ends on Jan 15 the following year.
Each year, the national budget is presented in Parliament by the
Minister of Finance on behalf of the Yang di-Pertuan Agong on the last
Friday of September or in the second, third or last Friday of October.
Q: What does the term balanced budget mean?
A: Balanced budget means the government’s revenues
are equal with its expenditures. In other words, the government does not
have to borrow and it utilises its tax receipts for spending. However, a
balanced budget does have its danger because as receipts drop, spending
drops too, resulting in fewer projects. Therefore, the people should
not get too excited over a balanced budget.
We wish to see substantial receipts and a big budget which is
balanced and without deficit and shortages. A balanced budget is also
linked to the granting of aid and subsidies to the people, like the
1Malaysia People’s Aid scheme (BR1M).
An increase in spending by the people will contribute to economic
growth. If the government does not offer BR1M, the poor will not be able
to spend. At the same time, we must be mindful of the fact that
uncontrolled spending can lead to inflation. Hence, we must exercise our
wisdom when it comes to spending and taking measures to control the
inflation rate.
Q: What is a deficit budget?
A: A deficit budget comes about when the
government’s spending exceeds its income. It means that the taxes
collected are not enough to cover the expenditure incurred in managing
and developing the country.
Q: What do the terms fiscal and fiscal deficit mean?
A: Fiscal and monetary are two of the main terms
used in a budget presentation. The most commonly used term is fiscal.
The term monetary is used indirectly as the monetary policy is handled
independently by Bank Negara Malaysia and it involves interest rates in
the market, conditions for the application of bank loans and other
matters.
Q: How can the government reduce its budget deficit?
A: It is very important for the government to reduce
its budget deficit because if left unchecked, the deficit can over a
period of time affect the currency of the nation.
It will also erode the confidence of foreigners in our currency,
leading to a depreciation in the value and strength of the Ringgit,
which will cause our imports to become more costly and the value of
exports to drop. When people no longer have confidence in our currency,
it will end up like other currencies such as the Rupiah and it will be
difficult for the Ringgit to regain strength.
Other factors that may contribute to a deficit budget include a
deficit in the balance of payments, whereby our imports exceed exports. A
deficit also occurs when the nation’s expenditure exceeds its income.
Q: What role can the people play to help reduce the deficit?
A: The people must increase domestic spending, be
thrifty as well as pay their taxes promptly. Civil servants should work
more efficiently and be more transparent in their operations. They must
refrain from being involved in non-productive activities and steer clear
of corruption.
Q: How far can this budget enhance the outlook for the nation’s credit rating?
A: The budget to be presented today will be
evaluated from the aspect of whether the government’s spending is going
to be prudent or not. Usually, the first question is whether or not the
government can afford to implement various projects. If many projects
are involved, then there is a possibility that the government will have
to resort to borrowings, which will affect the nation’s credibility.
There are two sources of borrowings, namely domestic and foreign.
Where domestic borrowings are concerned, the government can keep them
under wraps but foreign borrowings are exposed in the open market.
Hence, a budget that can enhance the outlook for the nation’s credit
rating has to be one that is balanced and productive.
If it is possible, subsidies should be reduced while aid is
distributed effectively to the poor so that they are able to spend and
help the economy to grow.
Q: Is it compulsory to include goodies in a budget?
A: Yes it is. This is because the budget requires
the support of the people. It is the government’s aspiration to get the
people to support all its plans for the nation.
Whether it is for enhancing the nation’s economic growth or boosting
the tourism industry, it needs the support of the people. What will
happen if tourists visiting the country find it in a state of chaos with
people demonstrating because they don’t have enough food and money?
So the government must have goodies in store for the people. Even in
the United States and Britain such goodies are provided because it is
the responsibility of the leadership to do so. There are claims that the
goodies are usually offered to civil servants. Disputes are bound to
occur when some sections of society feel that others are getting more
than them.
We must educate the people not to have such a negative way of
thinking. Some people who earn high incomes even question the
government’s decision to give subsidies or BR1M to the poor.
Q: How are individuals impacted by the budget?
A: At the individual level, the impact can be direct
or can come as a ‘side effect’ of the budget. For an individual, there
is the book scheme while some members of his family are also eligible to
receive BR1M or the fishermen’s subsidy.
For civil servants earning a salary and paying taxes, the government
gives them a half- or one-month bonus. So it is okay for the government
to raise the price of petrol, and offer a bonus to enable them to adjust
to the situation.
– BERNAMA
