Yesterday, the Public Finance and Fiscal Responsibility Act was passed in the Dewan Rakyat through a voice vote. It was tabled by Deputy Finance Minister I Datuk Seri Ahmad Maslan for the second and third reading. This Act, tailored to the Malaysian context, aims to ensure sustainable public finance, maintain macroeconomic stability, and safeguard the welfare of the people.
One of the key highlights of this Act is the emphasis on the accountability of the Finance Minister to Parliament in the management of fiscal policies and public funds. According to Ahmad Maslan, the aim is to avoid burdening future generations with excessive debts. He mentioned that the debt servicing in the past was 10%, but it has now increased to 16%. The government is open to suggestions for the establishment of a special parliamentary select committee to oversee national fiscal matters.
In addition, Ahmad Maslan mentioned that a Procurement Act will be introduced next year to ensure proper procurement processes.
The Public Finance and Fiscal Responsibility Act outlines the government’s responsibilities in terms of governance and transparency in managing public finances and fiscal risks, including revenue, expenditure, loans, and debt. The Finance Minister is responsible for formulating and implementing the government’s fiscal policy, with the primary objective of ensuring the sustainability of public finances, preserving macroeconomics, and safeguarding the well-being of the people.
As part of this Act, the Finance Minister is also required to develop a Medium Term Fiscal Framework, which will provide a three to five-year projection of the government’s fiscal position and economic projections. This framework will be accompanied by a revenue strategy and expenditure policy.
The Act sets certain fiscal objectives, including limiting annual development expenditure to 3% of the gross domestic product (GDP), ensuring government debt does not exceed 60% of GDP, and maintaining a fiscal deficit of 3% or less. Additionally, government guarantee should not exceed 25% of GDP.
In cases of sudden and unpredictable events that pose a significant risk to human lives, the economy, and fiscal position, the Act allows for temporary deviation from fiscal objectives. However, such deviations must obtain Cabinet approval and be presented in Parliament.
If the fiscal objectives become unachievable, the Finance Minister is required to present an adjustment plan to Parliament for approval. If the plan is rejected, the Dewan Rakyat may pass a resolution requiring the minister to improve the fiscal adjustment plan, which must be laid before the House.
To provide recommendations on fiscal policy matters, a committee chaired by the Prime Minister and composed of his deputies, the Finance Minister, Economic Minister, Chief Secretary to the Government, secretaries-general of the Treasury and the Economy Ministry, Bank Negara Malaysia governor, and two other appointees with finance expertise will be established.
Furthermore, the Finance Minister must present an economic and fiscal outlook report to the House for every financial year. Ahmad Maslan emphasized that the Act not only aims to reduce fiscal liabilities but also includes key performance indicators (KPIs) for fiscal targets.
As part of the Act, the Finance Minister is obligated to produce a mid-year expenditure performance report no later than September 30.
Credit: The Star : News Feed
