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.