Painful steps aplenty in Budget 2014, business paper predicts: KUALA LUMPUR, Sept 6 — Pressure is mounting on Putrajaya to table a 2014 Budget that will convince ratings agencies of its intent to tackle a chronic deficit, after its fuel subsidy cut this week failed to impress, according to Singapore’s Business Times (BT) today. Saying that Prime Minister Datuk Seri Najib Razak jumped the gun with the subsidy cut on Tuesday, after concerns of a withdrawal of US stimulus funds drove the ringgit to a three-year low, the business paper trotted off the reforms that it believes will help when he tables the Budget on October 25. “Almost everyone agrees that a good start would be the announcement of a timeline towards a goods and services tax (GST) with a reasonably substantive tax rate — 7 per cent is the figure being bandied about,” it said It cited one analyst as saying, “it would have to be at least 5 per cent to be meaningful”. And while the public has decried the subsidy cuts to petrol and diesel this week, the BT said broader and deeper cuts to the government’s price support programmes are needed. “A subsidy on sugar, much desired by local soda manufacturers, will also have to go. “Finally, Mr Najib should begin considering a slow but steady timeline on fuel subsidies but he needs bipartisan support on that one,” it continued. Putrajaya previously said it is committed to eliminating subsidies eventually and offer targeted welfare programmes such as the 1 Malaysia People’s Aid (BR1M) scheme to ensure a more effective distribution of benefits. But the BR1M move could also wipe out any savings that would have resulted from the subsidy cuts. Another measure that the BT predicted may also go to alleviate Malaysians’ complaints about home prices spiralling out of their range. “The real property gains tax (RPGT) might also go back to its original 5-30 per cent for disposal within five years; now, it is 15 per cent for disposal within two years, and 10 per cent for three and five years. It might also help cool what seems to be a growing property bubble.” In July, international ratings firm Fitch downgraded its outlook on Malaysia’s sovereign debt, citing weak public finances and poorer prospects for reforms following the ruling Barisan Nasional (BN) government’s smaller mandate following Election 2013. It also responded shortly after the fuel subsidy cut was announced to say that the move was not sufficient to change its mind on Malaysia’s credit outlook. Instead, it continued to press for the deep-cutting financial reforms that it called for when it first cut its projection on Malaysia while noting that conditions have not changed since its warning. Malaysia has run a deficit budget since the Asian Financial Crisis, amassing an official debt of 55 per cent of gross domestic product (GDP) today, just under the official ceiling of 55 per cent. Household debt has also grown at a similar pace and now stands among the highest in the region, at over 80 per cent. Among Putrajaya’s stated objectives is to trim the budget deficit gradually to 3 per cent by 2015. dlvr.it/3wQ7Cl
Posted on: Fri, 06 Sep 2013 14:50:43 +0000
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