KL to tighten govt spending next year

KL to tighten govt spending next year

KUALA LUMPUR (AFP): Malaysia would tighten government spending in its calendar 1998 budget to avoid wastage and ensure quality growth, Deputy Prime Minister Anwar Ibrahim said yesterday.

The government would also work towards strengthening the country's economic structure and enhancing its economic management, said Anwar, who is also finance minister.

"In line with this goal, the country's budget and financial policy is to continue to save and be disciplined," Anwar was reported as saying by Bernama news agency.

He said the country's sound financial system would have to be protected through constant supervision by the central bank and efficient internal management in the banks.

This was to avoid the pitfalls of overexposing bank loans to the growing property sector and low-quality loan growth as experienced by neighboring countries, he added.

Anwar was referring to the central bank's move in April to impose lending limits on properties and share markets to prevent a bubble economy but analysts warned it could backfire and choke the property market.

Malaysia was projected to achieve an eight percent growth this year after logging growth of more than 8.8 percent consecutively over the past nine years, he said.

The inflation rate for the five months to May improved to 2.9 percent from 3.5 percent in the previous corresponding period while the country's balance of payment for the four months to April showed a small deficit.

He said the country's debts were presently at a low level with a high level of reserves while the banking system was sound with a declining ratio of bad debts.

As such, the International Monetary Fund had labeled Malaysia's economy as experiencing "high quality growth" which had benefited the nation and reduced poverty, he added.

Anwar earlier this month promised to take a middle line on taxes in his October budget, saying that the government would adopt a moderate path to promote economic growth and encourage foreign investment.

Economists warned the government may have to devote more serious attention to overheating problems which had led to a big deficit in the nation's current account.

The central bank had predicted the country's current account to record a slightly larger deficit of 14.8 billion ringgit (US$5.92 billion) this year.

The deficit had narrowed significantly to 13 billion ringgit last year from 18.7 billion ringgit in 1995.