Anwar Ibrahim, Malaysia’ Prime Minister, passed the financial budget of year 2023 on October 13 that is the largest budget of the country so far. He is also the Finance Minister of Malaysia.
Targetive Approach:
Ibrahim has pointed out on using more targeted approach to reach out to the people who truly needs their help instead of blindly providing subsidies. He said that none other than rich people were getting benefitted from the policies of the government due to improper implementation and loopholes.
He said that economic policies are designed for economic growth and bringing equality among the citizens. And to achieve this objective, government needs to take planned steps and reduce the leakages from subsidy system. He said it is the only way to give true benefit to the needfuls, and also increases wages of the working class population.
Subsidy Checks:
Mr. Anwar assured that if they can achieve the goal of reducing subsidy spending, he promises to increase cash assistance through the ‘Rahmah Cash Contribution’ from the current RM8 billion to RM10 billion for almost 9 million residents. He pointed out that the subsidy cuts primarily focus on fuel and electricity, except for diesel subsidies, which will still be available to certain groups like logistics companies.
This strategic approach aims to minimize subsidy leakages, simultaneously lessening the impact on the prices of everyday goods for the people. Anwar highlighted the success of the recent targeted electricity subsidy approach, saving the government over RM4.6 billion by releasing subsidies to the top 10 percent with the highest electricity consumption.
Tax Reforms:
Various tax rates have been increased in this budget which according to the Prime Minister needs to be done. He increased the Sales & Service tax from 6% to 8%, excluding food, beverages and telecommunication sector. Taxes on High-values goods witnessed the highest increase i.e. 5% to 10%. High value goods include luxurious items like jewellery, watches, gold, platinum, high-end cars, etc.
A new tax on capital gains has been introduced at the rate of 10% which will be affection from 1 March, 2024.
Expansionary budget:
This budget passed in November is kind of an expansion to the budget passed in February, 2023. Only the allocation amount has been increased from RM 388.1 billion to RM 393.8 billion.
(RM is the Mayasian currency that stands for Malaysian Ringgit). After Anwar Ibrahim took the office in November, 2022 scholars have been anticipating such kind of reforms from him. He has again started the idea of presenting next year’s budget at the end of previous year.
Restoring Fiscal Position:
According to Ibrahim Anwar, only way to restore the fiscal position of the country is to reduce the Deficit balance and other liabilities of the country. Keeping this idea in mind, he has allocated the budget in a way that 77% of the whole amount that will amount upto RM 303.8 billion will be used for operation expenditure. Only RM 90 Billion is supposed to be used for development purposed.
Price Ceiling on Chickens and Eggs:
The government has decided to waive off the price ceiling on chicken and eggs for a temporary period of time. This price ceiling was imposed on 5 Feb, 2022 to keep a check on the increasing prices on chicken and eggs due to shortage of supply. The prices were increasing every month due to the increase in the cost of breeding and feeding. To avoid excessive inflation on these items, price ceiling was important to be imposed to keep the economy stabilised.
Visa Liberalisaiton Plan:
Mr Ibrahim has also announced that there will be some relaxations in the visa-applying process. The government had launched a MM2H program in 2002 that stands for Mayasia My Second Home program. This program allowed non-residents of the country to come and stay in Malaysia and enjoy various luxuries because Singapore is considered to be the second freest economy. However, there were a lot of requirements earlier to be eligible for this.
EV Industry:
Malaysian government has welcomed investments for EV sector (electric-vehicle), because we all know that it is the future of sustainable globe. The amount raised is estimated to be around RM 170 million which will be used to construct 180 EV charging stations across the country.
Also, a scheme is launched for EV motorcycle in which citizens who have income of RM 1,20,000 or below will get RM 2,400 rebated on the purchase, which can be an applaudable step.
Flood Mitigation Projects:
Mr Anwar also announced an allocation of RM 11.8 billion amount for 33 flood-mitigation projects. The PM said that he realised that serious steps need to be taken after he visited the flood relief centre. He said that it will keep happening again and again just like recent years if not worked upon.
Economic Growth:
The mantra behind this year’s budget was “Econmic reform, Empowering the People”. The government has set the target of 5% growth rate to be achieved in next year. The current rate of growth is expected to be 4% as per economic outlook report prepared by the Finance Minister.
Many economists were speculation the implementation of GST (Goods & Service Tax) too this year to increase the revenue of the govt.
Growth Rate concerns:
Malaysia, which faces a massive debt of RM1.399 trillion by the end of 2022, encountered a speed bump in the second quarter, with economic growth falling to its lowest level in over two years. To add to the concerns, the World Bank recently reduced Malaysia’s predicted growth rate from 4.3 percent to 3.9 percent, making economists concerned about the country’s economic health.
Strengthening Financial situation:
In the face of these financial issues, Mr. Anwar has proposed several sound measures to improve Malaysia’s financial status. The Madani Economy Framework, a large initiative to reform how Malaysia handles its money, is one of these plans. There’s also the New Industrial Master Plan (NIMP), which aims to increase the value of Malaysia’s manufacturing industry. These initiatives are all aimed at strengthening Malaysia’s financial status and placing the country on a path of strong and long-term growth.
