Rebuild fiscal buffers for future shocks

Scarring impact: The unprecedented scale of the pandemic serves as a catalyst for the country to adopt a responsible fiscal approach.

DURING the Covid-19 pandemic in 2020, the federal government had a tight balance sheet and high debt level – unbroken 23 years of budget deficit since 1998; federal government debt of RM793bil or 48.7% of gross domestic product (GDP) at end-2019; and total debt and liabilities of RM1.169 trillion or 77.4% of GDP at end-2019.

A tight budget has forced the Finance Ministry to make some exemptions to the rules and discipline or specific clause of government financing and spending to undertake counter-cyclical measures to ease the pain of economic recession inflicted by the pandemic.

The Temporary Measures for Government Financing (Covid-19) 2020 Act was formulated to save human lives and the economy. The Act allows the government to obtain additional borrowing to finance measures under the economic stimulus packages and recovery plan.