KUALA LUMPUR” The government’s plan to place new civil servants under the “defined contribution’”scheme instead of “defined benefits” pension scheme will put the country’s public finance in a long-term sustainable position, according to Sunway University economics professor Dr Yeah Kim Leng.
Dr Yeah Kim Leng stated in an interview with Bernama that the decision is a crucial measure to gradually reduce the escalating pension liabilities.
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He believes that this shift will reduce a major fiscal vulnerability and provide greater flexibility for employees and the government to adapt to the changing economic environment.
Shifting to a contributions scheme aims at slowing down the government’s total accrued pension liabilities, according to Yeah.
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Another immediate impact of this change is that the government will have to allocate additional funds to pay its part of the Employees Provident Fund for new employees.
Yeah added, “It thus provides the government with the ability to gradually lower the unfunded portion of the total accrued pension liabilities to a sustainable level, thereby avoiding any fiscal cliff or crisis in the future.”
Finance Minister II Datuk Seri Amir Hamzah Azizan revealed that the national debt will reach RM1.2 trillion or 63.5% of gross domestic product (GDP) by the end of 2023. The inclusion of guarantees and other liabilities would push it beyond RM1.5 trillion, which is over 80% of GDP.
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A significant concern for the government is the servicing and mitigation of this debt, leading to debt service payments accounting for 16% of national revenue in Budget 2024.
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Amir Hamzah stated that the government aims to expand its revenue and create more room for spending on essential services for the people to live more comfortably.
Dr Yeah Kim Leng believes that tackling the country’s large liabilities and fiscal vulnerabilities through systematic fiscal consolidation and restructuring will strengthen the public finance and lead to easier attainment of the Madani Economy targets.
Yeah added, “This is especially so as a rise in investor confidence in the country’s fiscal management will lead to a virtuous circle of higher investment, stronger employment creation and faster income increases that in turn attract more investments.” – Bernama
