Concerns over health of public finances to be addressed in Budget 2014

KUALA LUMPUR: A detailed strategy on how to address growing concerns over the health of Malaysia’s public finances will be addressed in Budget 2014.

“We have already put in place a fiscal committee, which is looking into some of the challenges that we face, and all these will be addressed shortly, especially in the forthcoming Budget,” said Prime Minister Datuk Seri Najib Tun Razak.

Budget 2014 is expected to be tabled on Oct 25.

Najib, also the Finance Minister, stressed that the Government remained committed to strengthening the country’s macroeconomic and fiscal position.

“At the moment, we are looking at various policy options ... we do understand there is a need for us to strengthen our fiscal and macro position,” Najib said in response to Fitch Ratings’ concern over the ability of the Malaysian Government to rein in its debt and spending.

Fitch had on Tuesday downgraded Malaysia’s sovereign credit rating outlook from “stable” to “negative”, citing that the prospects for budgetary reform and fiscal consolidation to address weaknesses in public finances had worsened after the 13th general election in May.

The international rating agency, however, had reaffirmed Malaysia’s long-term foreign and local currency at A- and A respectively.

Najib said the reaffirmation on the country’s long-term foreign and local currency was “something positive”.

“The revision is only in terms of the outlook, which will depend on the move that the Government will make. I think it is good for us because it signals their concern. It is a concern that we share as a government, and we will seek to address those concerns,” he said at a press conference after launching the new iconic brand identity, “Malaysia: World’s Islamic Finance Marketplace”, here yesterday.

Meanwhile, Malaysia’s stock market rebounded yesterday after falling to a three-week low on Wednes­day following Fitch’s downgrade.

The FTSE Bursa Malaysia KL Composite Index rose 5.2 points, or 0.29%, to close at 1,777.82 points. The benchmark stock index had on Wednesday fallen 22.46 points, or 1.25%, to close at a three-week low of 1,772.62.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said Malaysia had the capacity and capability to address its fiscal vulnerabilities in a gradual and sequenced manner.

“Malaysia still has time to do it, but of course it is now more urgent because the global environment has become more challenging.

“The recovery that we had expected from major economies has not strengthened, and going forward, it is very likely that it will continue to remain modest.

“Therefore, it is important for us to reduce our vulnerabilities, one of which is in the fiscal area,” Dr Zeti explained, adding that Malaysian policymakers were putting emphasis on increasing national resilience and boosting its potential to sustain economic growth.