Tengku Zafrul says RM500m additional spending in Budget 2021 won’t affect country's deficit

Soo Wern Jun
·3-min read
Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz tables Budget 2021 in Parliament November 6, 2020. ― Bernama pic
Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz tables Budget 2021 in Parliament November 6, 2020. ― Bernama pic

KUALA LUMPUR, Nov 28 — Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz has assured the public today that Putrajaya’s deficit will not be affected despite an additional RM500 million spending proposed in the Budget 2021.

According to Tengku Zafrul in an interview with business paper The Edge, since a one per cent deficit will amount to RM15 billion, a mere RM500 million will not amount to much.

“So RM500 million is less than 0.1 per cent. So that is why the deficit won’t move so much. It’s a big number in absolute terms, but in [terms of] the size of the economy of RM1.5 trillion, then it becomes very small.

“In fact, it doesn’t even touch 0.1 per cent of the deficit,” Tengku Zafrul reportedly said.

He said that is why the government is confident that deficit will still be in that range, although this still depends on the gross domestic product (GDP) numbers at the end of the day.

He also said the fiscal deficit target of 5.4 per cent has also incorporated the RM10 billion Covid-19 aid announced.

“Is the Covid-19 fund outside the deficit? It’s not, it is within,” he reportedly said.

In his winding up speech prior to the voting for Budget 2021, Tengku Zafrul had announced several new and improved measures which led to the shaky Perikatan Nasional (PN) government to get its Budget passed.

This included a series of cash handouts and additional Covid-19 aid.

In the medium term, Tengku Zafrul said the government’s deficit target for between 2021 and 2023 remains around 4.5 per cent of the GDP, but this is based on the current tax framework.

“There is this question — if you introduce new taxes, would it go lower? I’m assuming a 4.5 per cent deficit even in the current tax framework. But we want to reduce this fiscal deficit to 4 per cent in three to four years.

“But how we get there hinges on global recovery, growth. Malaysia, being a trading nation and export-oriented economy, will be heavily dependent on the global recovery,” he was quoted saying.

When asked about potential ratings downgrade should the economic recovery and GDP fall short of expectations and the risk it poses, Tengku Zafrul said he has met all three rating agencies — Moody’s, Fitch and S&P — and a key focus of the rating agencies was to ensure that Malaysia growth continues to be strong.

“If you look at countries in the same A-rating category, Malaysia is there also because of the strength of our economic growth.

“Our sovereign rating is always being supported by strong growth resilience and also policy credibility on our commitment to medium-term fiscal consolidation efforts.

“So, that’s why those two key points are important — where the GDP growth will be for the next couple of years and where our financial position is going to be in the next couple of years,” he said.

Tengku Zafrul asserted that the rating agencies know that next year is a transition year not just for Malaysia but also the rest of the world.

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