Guan Eng: Fiscal targets by previous govt unrealistic

KUALA LUMPUR: Finance Minister Lim Guan Eng said the fiscal targets set by the previous administration are unrealistic in the short term and it would be “foolish” of the current government to maintain.
“Over the medium term however, we will remain strictly on the path of fiscal consolidation as we reform our institutions and processes, increase our revenues, optimise our expenditures as well as rationalise our debts,” he said during his speech at “Malaysia: A New Dawn” investors conference.
He said the RM 1 trillion debt and liability is the consequence of the previous administration’s escalating ingenuity in adopting off- balance sheet financing for government expenses and financing over the past decade.
“While the creative off-balance sheet debts and spending by the previous administration were not entirely a surprise, we were taken completely off-guard to discover that government revenues had also been overstated in the previous financial budgets to present a false picture of prudent fiscal consolidation,” he said.
Lim added that the new government is determined to clean-up its accounts and make the public sector more transparent in its finances, by committing to a shift from cash-based to accrual accounting standards by 2021 that will inculcate the necessary fiscal discipline in the current and future governments. The transitionary period is likely to take about 5-7 years.
Citing the establishment of the Public Finance Committee (PFC) as part of efforts to strengthen fiscal reforms, he said the PFC’s mandate is to strike a balance between the government’s commitments to fiscal consolidation and its need to make continuous productive spending and investments.
The PFC is chaired by Lim with Minister of Economic Affairs Datuk Seri Azmin Ali and Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus as members.
Additionally, the government’s direct participation through equity ownership in companies will be reduced, which in the case of companies listed on the local bourse, will help improve liquidity in the capital markets.
“We have heard numerous complaints from investors and businessmen alike that our capital markets is too illiquid, controlled effectively by several government linked investment corporations,” he noted.
This he said, had led to a lower MSCI emerging market weightage of the Bursa Malaysia which stood at 2.48%. – By V. Ragananthini