KL's budget sails through economic crisis

KL's budget sails through economic crisis

KUALA LUMPUR (AFP): Malaysia's "balanced budget formula" has enabled the country to sail through the crises in its currency and stock markets, Deputy Premier Anwar Ibrahim said in reports published Saturday.

Anwar, who is also finance minister, said the government had planned for a surplus budgets to allow Malaysia to "breathe easy" in anticipation of difficult times amid robust growth.

"Not only is our budget balanced, it is formulated so that there will be surplus to give us strength to breath easy even in difficult times," Anwar was quoted as saying by the Business Times daily.

"The surplus is the one allowing us to breath comfortably in the current haze situation. If we had all expenditures without any surplus the last four or five years, we would definitely have been choked to death in the haze," he said in jest.

The deputy premier said Malaysia needed to increase its national savings to narrow the gap between savings and foreign investments, in order to reduce the country's exposure to currency fluctuation risks.

Anwar is scheduled to unveil the country's 1998 budget in parliament on Oct. 17.

Analysts expect the budget to contain tough measures to address economic ills and restore stability in the ringgit which has plunged more than 30 percent since July, while the stock market has lost over one-third of its capitalization.

A former treasury official, Ramon Navaratnam, urged the government Saturday to form a "tough, imaginative and realistic" budget that would show the way out of the country's current problems.

"The budget would have to change gear and change directions for the economy to face the latest and the new challenges of the 21st century," he said in a commentary published in the New Straits Times.

Ramon proposed that the central bank keep "a tighter rein on the banks" to ensure they skewed lending to more productive sectors.

"If tighter discipline is enforced consistently, then even money supply could be restrained before it gets too high and intolerable. Better to be conservative rather than careless," he said.

Ramon said that the main thrust of the budget should be to "reduce expenditure and to increase productivity and exports" to take advantage of the weak ringgit.

The budget should moderate the profits of privatized entities and increase supervision of privatized services, he said.

Ramon said that the "economy is tired" after a decade of growth averaging above eight percent a year and that "a little slowing down will help the economy catch its breath."

"It will reduce the balance of payments deficit, the currency will strengthen and the risk of higher inflation will decline. The economy will then consolidate and strengthen," he added.

Anwar had earlier this week said Malaysia's economic growth may dip to as low as six percent next year.