Tough balancing act

A key question is how the additional government spending would affect the country’s sovereign ratings and in turn, hurt investor sentiment. On June 22, S&P Global Ratings cautioned that its ratings on Malaysia could face downward pressure over the next 12 to 24 months if there is a weaker commitment to fiscal consolidation or if the economic growth suffers a deeper or more prolonged downturn than expected.

SOME 11 years after Malaysia announced its ambitious plan to reach a “near-balanced” budget by 2020. The country has not only missed its target but is also facing a fiscal dilemma amid a widening budget deficit and the call for more stimulus injection.

The budget deficit level had been steadily declining since 2010, but this came to an end in 2018 after the then Pakatan Harapan government recognised off-the-books projects as development expenditure to deal with the burgeoning debts left by its previous administration.