Speculation is rife that the Prime Minister, Ismail Sabri, will seek an audience with the Yang DiPertuan Agong tomorrow, Thursday, 6th of October 2022, where he will ask for the parliament to be dissolved the following day, prior to the tabling of the 2023 budget. This decision not to allow the 2023 budget to be tabled, debated, and passed in parliament will have significant negative consequences to the country’s economy. Leaders of all parties and Members of Parliament should do all in their power to appeal to the Prime Minister to allow for the 2023 budget to be tabled, debated, and passed in parliament before parliament can be dissolved.
The first impact of the non-tabling of the budget would be seen in the currency markets where the Ringgit, already trading at a historic low of RM4.63 to 1US$, will fall further. The Ringgit will also likely fall against other currencies of our major trading partners including the EURO and the Singapore dollar. Imported inflation due to the falling value of the Ringgit will also likely increase.
The second impact will be increased borrowing costs for the Malaysian government due to an increased risk premium from political uncertainties. Without a budget, domestic and foreign investors will have no guidance on the expected fiscal trajectory of the Malaysian government in 2023 including the Ministry of Finance’s strategy on managing government revenue and expenditure. This includes the expected dividend from Petronas, additional revenue from changes in tax policies and the possible introduction of targeted subsidies in sensitive areas such as petrol and electricity. Without such guidance, foreign investors will err on the side of caution and sell Malaysian assets such as bonds and equities. Investors will also demand a higher interest rate on government bonds to account for greater uncertainty and higher risks.
The third impact will be the inability of individual Ministries and government agencies to align their policies to the budget. Since the budget document is not revealed to the other parts of government only until the budget speech, many Ministries cannot confirm if their expenditure and policy requests to the Ministry of Finance has been approved until budget day. Only AFTER the budget has been announced, including the publishing of more detailed line-item expenditures in the budget estimates for individual ministries, can each Ministry confirm their policy plans for the upcoming year especially for Ministries which have requested for new expenditure items to be approved. While salaries of civil servants and payments for debt servicing can continue even without the budget being passed, other policy related programs will inevitably be delayed, and this could affect our economic recovery post-pandemic.
Some have pointed to 1999 as a precedent for when a budget was tabled but not passed because of the dissolution of parliament. But the economic and political conditions in 2022 is very different from 1999. In 1999, the ringgit currency peg provided some protection against currency fluctuations (Please note that I am not advocating for a return to a currency peg). In 1999, the budget for 2000 was tabled on the 29th of October, parliament was dissolved on the 11th of November and elections were held on the 29th of November. Even with the BN holding on to its 2/3rd majority, the budget could only be re-tabled in parliament on the 25th of February 2000, almost three months after polling day. For GE15, with an additional 6 million new voters, the Election Commission will need more than 3 weeks from when parliament is dissolved to polling day. In addition, there is no certainty that one coalition will be able to win a comfortable majority to form government which means any post-election will take some time to form. The absence of a budget will only add on to the political and economic uncertainties in the post GE15 political landscape.
We can look to the recent “mini-budget” announcement by the Chancellor of the Exchequer, Kwasi Kwarteng. The badly conceived budget promising tax cuts for the top income bracket cause a fall in the pound sterling to below 1.10, caused government bond yields to surge by 0.8%, and forced the Bank of England to take emergency actions to purchase huge amounts of government bonds. In the case of Malaysia, the non-budget announcement may trigger similar reactions from the market. This can and should be avoided.
Most people can see that the only reason why UMNO President Zahid Hamidi wants parliament to be dissolved now, before the tabling of the budget, is to give himself more time before the eventual court judgement on the 47 charges he is still facing associated with misuse of RM31 million worth of Yayasan Akalbudi’s funds. The negative impact on the country’s economy because of a delayed budget is the furthest thing from his mind compared to his own selfish interests.
Extraordinary times calls for extraordinary action. I hope and pray that leaders and members of parliament from all parties (other than Zahid Hamidi) can come together to make a stand that the 2023 budget should be tabled, discussed, and passed in the Dewan Rakyat and Dewan Negara, before parliament is dissolved for GE15 to take place.