Revised Budget 2023: tackling the rising cost of living

 Zaidi Ismail
24 Feb 2023 08:08am
Will the revised budget effectively tackle the rising cost of living for Malaysians?  - FILE PIC
Will the revised budget effectively tackle the rising cost of living for Malaysians? - FILE PIC

SHAH ALAM - All eyes will be on Datuk Seri Anwar Ibrahim tomorrow when he retables a revised Budget 2023.

The question on everybody's minds right now is how much will he rejig the budget previously tabled by his predecessor? Will there be more new goodies on the cards? Will subsidies be gradually removed?

Taking a second look at subsidies

Economists say Anwar will essentially keep to the budget previously proposed by the previous government, and that he will ensurel ensure that the subsidies are better targeted at the poor and lower income group.

"The cost of living has gone up. It is stubborn and does not want to come down.

"To help in meeting the cost-of-living challenges, the government should increase job opportunities.

"Incentives could be given to companies to provide training for the jobless and to absorb them into their workforce," said Professor Datuk Dr John Antony Xavier.

Will GST be reintroduced?

Top on everybody's minds is the on-again off-again GST or the Goods and Services tax.

Given the current circumstances, Anwar would not want to reintroduce GST despite the fact it is an efficient system of taxation as it is based on consumption. As such, it's coverage of the taxable population is higher than that of the income tax and it can surely bring in more money to the government coffers than the current SST or sales and service tax.

Professor Datuk Dr Antony Xavier said the GST however is a regressive tax in that it hurts the poor more than the rich.

"However this negative impact on the poor can be cushioned by exemptions to products consumed by the poor such as food stuffs," Xavier told Sinar Daily.

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"To reintroduce the GST will require dismantling the current SST and putting in place a proper implementation system.

GST requires a communications blitzkrieg

As the government was recently installed, it has to make sure that the implementation is proper and that the rate is small to win the hearts of the people with the GST.

Subsidies could be trimmed

Rather than heading straight to the GST, the government can use whatever revenue it has to ensure that subsidies only go to the poor and the lower income groups. That way the government can conserve its revenue position rather than going into an ambitious exercise to increase revenue through the GST.

This is all the more important as at 62 percent, the debt to GDP ratio is just slightly above the 60 percet limit suggested as sustainable by the World Bank.

"But the situation is not dangerous as some 55 percent of the debt is sourced locally. And so we shall not be exposed much to currency fluctuations that can increase the cost of debt servicing," said Xavier.

He added as the country's debt ceiling is 65 percent, the government has some room to borrow more for development/capital expenditure and infrastructure development.

Allocate more for rural devrlopment

The government should also allocate more money for rural development so that the disparity in urban and rural development is narrowed.

Strengthening the Madani concept

During this budget, Anwar will also focus on his Madani concept to strengthen institutions and win the trust of society in them. He will continue to tackle corruption and strengthen the MACC and make the public service more business friendly. Bolstering broadband speed.

The new government should also increase the country's broad band.

Currently, the country's broadband speed is half of Singapore which has the fastest speed.

Spur more R&D activities

To become an innovative nation, Anwar should increase allocations for research and development activities.

Malaysia only spends about 1 percent of gross domestic growth on R&D.

Rich countries spend as much as 4 percent of GDP on R&D.

Thus there is a need for Malaysians to think out of the box so that it can roll out innovative plans.

Meanwhile, Associate Professor Dr Ahmed Razman Abdul Latiff said most likely the upcoming budget will be revised based on the mandate given to the unity government whilst taking into account the Malaysia Madani concept, current global economic scenario and immediate domestic concern such as high cost of living.

"The upcoming budget probably will not be the largest as the government will try to reduce the deficit spending to -5.5 percent or below GDP.

Targeting subsidy

Targeting subsidy will probably be introduced especially on RON95.

This will help to reduce the total allocated subsidy for the year estimated at RM80 billion a year.

"The GST in my opinion will not be introduced as this will impose additional burden to rakyat and so it is better we adopt the SST for now.

Meanwhile, Bank Islam Malaysia head of research Dr Rosnani Rasul said the retweaked budget is game changing given the fortitude for fiscal sustainability.

"Malaysia will finally detach from the subsidy mentality and this will be a boon for the future; an agile and nimble Malaysia".