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In what was Najib’s maiden speech as a Finance Minister, he has cast more doubts about his alleged or perceived ‘financial prowess’ or at least spun by mainstream media as being better than the PM.
For whatever benefit of doubts many were willing to provide him, it indeed quickly evaporated midway in his delivery of what is now called a ‘stimulus package’ to bolster the economy. It has nothing to do with his refusal to allow opposition leader and MPs to interject during his delivery, an unprecedented move strangely condoned by the Speaker.
Firstly, quite unsolicited, he decided to take a pot-shot at the PR’s budget, perhaps more accurately the Opposition leader, by accusing that PR’s budget is ‘Contractionary’ as opposed to their ‘Expansionary’ one. He cunningly reminded everyone, that the nation will be in greater trouble if we were to pursue PR’s budget as alleged to have been done in the’97 financial crisis.
Najib is either clearly ignorant, which of course spells doom for this nation’s future or simply misleading the House, which is worse, as his little credibility will be further dented. If he claims to have been misled by his spin doctors that will of course be worst, as he equally betrays his ineptness, a disease he has to wage a war against, to keep the government and Umno afloat and relevant.
Defining an ‘Expansionary or Contractionary Budget’ has to do with a budget being deficit or surplus respectively. While the BN’s 2009 budget poses a projected deficit of RM28.45 billions, the PR’s budget deficit stands at RM22.10 billions. Both are equally a Deficit Budget and both are equally Expansionary! Period. A lesson in Economics 101 would be in order for our new Finance Minister.
That addresses Najib’s malicious attack on PR’s budget, accusing us of bringing us the nation to economic disaster as widely and repeatedly demononised by the mainstream media last-nite.
On 23rd October, PR presented a budget strategy in response to addressing financial uncertainties and restoring confidence in our economy. While clearly expansionary and anti-cyclical, to weather the ‘slowing down of growth with concurrent inflationary pressure on goods and services with the consequent massive unemployment’ (ie stagflation), PR’s budget addresses where and how the deficit is to be funded and sustained.
Going by the current prices of crude oil and (CO) crude palm oil (CPO), a conservative estimate of RM18 billions have been lost from BN’s budget revenue projection. CIMB’s Research House estimated that for every USD10/barrel reduction in price (Tapis crude oil), we are in to lose RM4billions a year. For every RM100/tonne of CPO, we will be robbed of RM1.7billions. An estimated loss or reduction of revenue to the tune of RM18-20 billions is to be anticipated.
PR’s budget wasn’t simply expansionary but prudently so, as to maximize the ‘multiplier effects’ in critical sectors of quality housing, healthcare and education. The budget was aimed at ensuring ‘quality deficit’ be achieved, not the like of injecting into speculative activities seen in injecting RM5billion EPF’s fund to shore-up ‘undervalued companies’, or multi-billions mega-infrastructural projects in underground cables or double-tracking railways and worse still dubious military procurements like the Eurocopter and others.
Najib blissfully announced that there will be a saving of RM7billions as a result of reduced fuel subsidy. Totally oblivious of the anticipated loss of revenue mentioned above and grinning, he went on a ‘spending spree’ in his ‘expansionary stimulus’. I may not want to comment on that now.
On closer examination, Najib has finally admitted a diminution in income albeit, not as much as PR’s or other Research Houses’ projections. From the PM’s revenue of RM176.22billions, Najib now admitted that he’s looking at RM168.73billions. He only conceded a reduction of RM8billions in revenue.
Presumably that must be from the reduction of revenue in CO and CPO. Even if we were willing to take a conservative estimate of RM18billions and deducting from a saving of RM7 billions for a reduction in fuel subsidy, you still have a yawning RM11billions as deficit in revenue! Though not wanting to admit this out-rightly, he has now indirectly conceded, by projecting a bigger deficit of 4.8% over the deficit of PM’s budget of 3.6%.
But behold! This FM is now weirdly and foolhardily coming out with another RM7billions, he now claims to be from the fuel subsidy again. Mind-blowing! Now the numbers simply don’t jive, whichever ways you look at it.
Now that RM7billions have to come from borrowing and leveraging or gearing…all these ‘vulgar’ and ‘dirty’ words of the ‘overleveraged’ US economy. It would have been better for the FM to simply admit that the RM7billions to be injected are to be borrowed from whatever source (EPF etc) or that the government is raising bonds for it.
Yes we may have a healthy national reserve of 37% of our GDP. Yes we may have a low NPLs for the time being. Yes we may have a low foreign debt currently at RM187 billion with RM70billions private debt. As of April 2008, this may be 20% of the foreign reserve.
We may grudgingly admit that our fundamentals may be strong though quite obviously not trickling down to the rakyat, thanks to inflation and the poor distributive justice.
But we also have been on a deficit budget for the last 10 years mind you. Hence even if we are to be injecting fiscal stimulus in an anti-cyclical measure, as suggested by both BN and PR, we must be prudent and doing it productively.
Our bullishness may now be totally misplaced as party time has long been over Mr. FM. The Eurocopters deal, faulty FSBB project award and other mega-projects should have been voluntarily withdrawn long before, should you have the foresight.
I now doubt whether you have any hindsight. Your recurring blindspot is extremely distressing and very worrying to say the least!
Dr Dzulkefly Ahmad
Director of Pas Research Centre and
MP for Kuala Selangor. (www.drdzul.wordpress.com )
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