By Sharifah Azzahra, Certified Risk Advisory, Selangor
It is very concerning to hear that the recent announced budget (Budget 2023) represents a RM40.2 billion increase compared to the RM332.1 billion allocated for 2022. On the day before the Budget Speech, the Public Accounts Committee (PAC) has expressed concern over the RM100 billion increase in the federal government’s debt in a span of a year.
It is important to be reminded of the concern raised by PAC which was:
- The practice of using new loans to repay mature loans, the reduction in development expenditure, and the increase in federal debt
- On interest payments, the report noted that 16.3% of revenue collected by the government was used to pay loan interests. Which reflected to for every RM1 in revenue collected, 16 cents are being used to pay loan interests
What is there in 2023
- Global recession
On 6th October, the IMF has warned the world about higher recession risk and darker global outlook in 2023, most probably caused by the COVID-19 pandemic, Russia's invasion of Ukraine and climate disasters on all continents, and there is possibility that it could get worse. The emerging and developing countries has already hit hard with high food and energy prices.
- Food crisis
The food crisis could worsen in 2023, with a supply squeeze overtaking logistical constraints as the key challenge. The situation worsens with the war in Ukraine that pushed the prices of food and fertilizers higher hurting importers and prompting several countries to impose export restrictions. With the expectation of having food crisis in the coming years, China is currently building up huge stockpiles to cope with shortages and created new seeds to boost output for local consumption. India has restricted exports of some varieties of rice, as the world's largest supplier tries to ensure domestic provisions amid global pressure on the food market.
Interest rate hike
Higher interest rate will result to lower disposable income which will be translated to lower purchasing power. It is crucial to understand that the higher the inflation rate, the higher interest rates are likely to rise. This is to cater for the expectation of the lenders (will demand higher interest rates) to compensate for the decrease in purchasing power of the money they are paid in the future.
It is important to have in mind all of the above expectation we will be facing in 2023. The announcement of the budget has somehow put very low emphasis on ways to tackle such expectations next year. The emphasis of the budget is mostly on promoting spending through various cash assistance programs in the midst of inflationary environment when it is obvious that increasing the money supply will further increase the price of goods in the future.
It is also crucial for us to realized that 60 percent of Malaysia's food is imported. Hence, it is a disappointment to acknowledge such low emphasis has been given to the agriculture sector despite the expected food crisis in 2023. Only RM1.8bil in subsidies and incentives was allocated in the sector of the economy.
Expectations and Transparency
In addition to the above, I would like to urge the Minister of Finance, Tengku Zafrul Aziz to present to the public the utilization rate of all funds and scheme that has been located under BNM, Ministries and GLC in 2022 in comparison to all the scheme and fund allocated for 2023. The budget has somewhat been announced without the transparency on the utilization rate of each of the component in Budget 2022. For transparency and performance purposes I do believe that it is crucial for the public to be made aware of the Budget 2022 utilization rate in comparison to the recently announced Budget 2023.
In addition, it is also important for the public to know how the national debt will be paid in 2023 as we are expecting Federal government revenue to drop 4.4% to RM272.57 billion in 2023, from a growth of 22.0% (RM285.22 billion) in 2022. It is definite that higher government spending do raise major concerns over whether it is sustainable in the long run, as the budget indicate very least commitment to expand the government's revenue base give high debt ratio and rising inflation reported.
If all the 2023 scenario mentioned happen in 2023, will we be able to stay strong and be more self-sufficient in Malaysia? It looks like it still a long way to go, however it is important for the public to start to care about all the national policies, budget and agenda the government is mentioning because at the end of the day, the choice is in your hand. The future is for our children, hence seek knowledge and be knowledgeable is the key for the betterment of this nation.