The Public Finance and Fiscal Responsibility Act was approved by the Dewan Rakyat on Wednesday (Oct 11) after being presented for the second and third reading.
Deputy Finance Minister I Datuk Seri Ahmad Maslan introduced the bill for the first reading in the Dewan Rakyat on Tuesday (October 10).
One objective of the Act is to reduce the fiscal deficit to 3.2% by 2025.
“We want to avoid burdening future generations with debt. Previously, we were servicing 10% of our debts, but now it has risen to 16%,” said Ahmad Maslan during the bill’s discussion.
“This means we are currently paying 6% more, resulting in the present generation being unable to enjoy this 6% due to debts incurred in the past,” he added.
Ahmad Maslan welcomed suggestions to establish a special parliamentary select committee to address fiscal matters and stated that the government would consider this proposal.
He informed the House that a Procurement Act would be presented next year to ensure appropriate procurement processes.
The bill aims to outline the government’s responsibilities in terms of governance and transparency in managing public finances and fiscal risk, particularly regarding revenue, expenditure, loans, and debt.
As per Clause 5 of the bill, the Finance Minister is responsible for formulating and implementing the government’s fiscal policy with the main goal of ensuring the sustainability of public finances, preserving macroeconomics, and safeguarding the well-being of the people.
The Finance Minister is also required to create a Medium Term Fiscal Framework, which will include a three to five-year projection of the government’s fiscal position and economic projections.
Additionally, there should be a revenue strategy and expenditure policy to support this framework.
According to the fiscal objectives of the Act, annual development expenditure should not exceed 3% of the Gross Domestic Product (GDP).
The government debt level should not surpass 60% of the GDP, while the fiscal deficit should be at 3% or less.
Government guarantees should not exceed 25% of the GDP.
The Act also includes a provision for the government to temporarily deviate from its fiscal objectives in the case of an unforeseen event posing significant risks to human lives, the economy, and the fiscal position. However, such deviation must obtain cabinet approval and be presented in Parliament.
If the fiscal objectives cannot be achieved, the finance minister must present an adjustment plan to Parliament for approval. If the plan is rejected, the Dewan Rakyat may pass a resolution requiring the finance minister to improve the fiscal adjustment plan, which must be presented to the House.
A fiscal policy committee, chaired by the Prime Minister and comprising deputy ministers, 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 finance experts, will be established to make recommendations on fiscal policy matters to the cabinet.
Furthermore, the minister is obliged to present an economic and fiscal outlook report for each financial year to the House.
Ahmad Maslan emphasized that the goal of the Act is not only to reduce fiscal liabilities but also includes the Key Performance Index for fiscal targets.
One new responsibility imposed on the Finance Minister is the requirement to release a mid-year expenditure performance report no later than September 30.
Credit: The Star : News Feed
