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.