Wednesday, November 05, 2008

Najib Needs Better Economic Advisors

Firstly, I would like to congratulate the new Finance Minister, Datuk Seri Najib Abdul Razak for having at least read the alternative budget presented by Pakatan Rakyat, as admitted during his budget wrap-up speech and his subsequent press conference.

However, he certainly needs a better understanding of public economics, or at the very least engage better economic advisors.

The designated future prime minister has during his speech claimed that we have tabled an alternative budget which was “contractionary” (speech item 25) in nature, while the one by the Barisan Nasional (BN) government was “expansionary” in nature.

We would like to point out to the Finance Minister that a “contractionary” budget is one which results in a budget surplus, whereby the government's expenditure is less than its revenue. However, the budget tabled by Pakatan Rakyat was clearly an expansionary budget as it will result in an estimated 3.0% in budget deficit.

The key difference between the BN budget and the PR budget is hence not that the latter is “contrationary” as alleged but the fact that the former is overly expansionary, which will result in a sizeable increase in budget deficit from the initially projected 3.6% to 4.8% or possibly even higher.

The Barisan Nasional government has over the past 5 years nearly doubled its operational expenditure from RM80 billion in 2004 to RM154 bill for 2009. In addition, the proposed government's operational expenditure for 2009 has exceeded even the total expenditure just 2 years ago in 2006, which amounted to RM136 million.

In the light of a sharp reduction in government revenues arising from significantly lower petroluem and corporate tax revenues due to falling oil and commodity prices, the Pakatan Rakyat budget has taken the responsible move to cut wastage and inefficiencies incurred in the operational budget. The RM24 billion savings in operational expenditure of the PR Budget, compared to the BN budget can hence be better and more effectively utilised in other development expendtires which will benefit the rakyat.

Hence, Datuk Seri Najib's insistence that he wasn't lying when he said Pakatan Rakyat's alternative budget a contractionary budget on the basis that "[PR] suggest an operating expenditure of RM130 billion when ours is RM154 billion," is completely baseless.

As the economy faces critical challenges in the coming months and possibly years, it is important for the government to not only spend money to strengthen and boost the economy, we must spend money effectively without wastage and corruption while at the same time be cognizant of our financial abilities, so as to not over-extend our expenditure which will result in a runaway deficit and its corresponding implications.

In the interest of Malaysians at large, we will hence be more than happy to explain our Pakatan Rakyat budget to the Finance Minister or his advisors, should he not have the necessary expertise to understand our budget document.
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