Critical funding for national recovery

Global sovereign wealth funds

THE Malaysian government's earmarking of RM5bil to be utilised from the National Trust Fund (NTF) is in line with other world governments' efforts to increase their fiscal space during the Covid-19 pandemic.
The Fiscal Outlook 2022 states that the NTF funds for the national vaccination drive is a critical component of the country's recovery plan to exit from the crisis, accelerate economic recovery and safeguard its future.

The objective of the NTF, which was established in 1988, is to ensure the optimisation of the country's non-renewable natural resources as a more sustainable source of revenue for future generations.

However, the Fiscal Outlook 2022 notes that other countries have also utilised their savings and stabilisation funds, particularly funds sourced from natural resources, to finance their assistance and stimulus measures in tackling the pandemic.

"This is in line with one of the purposes of establishment of the Sovereign Wealth Funds which is to provide immediate fiscal support during a crisis," it says.

It adds that the Malaysian government is committed to replenishing funds utilised from the NTF once the economy stabilises and returns to its growth trajectory.

In Malaysia, the utilisation of the NTF to fund the National Immunisation Programme was necessitated by the second and third waves of the Covid-19 pandemic, which led to an exponential increase in infection cases that strained the national health system.

"With financial support from NTF, Malaysia is progressing well in its vaccination drive, where the nation is currently ranked among the highest in the world in terms of daily Covid-19 vaccination rate," it says.

As at Sept 20, 2021, a total of 20 million individuals or 85.7% of the adult population have been fully vaccinated.

The Fiscal Outlook 2022 highlights that the government's fiscal space is limited as it is required to roll out various stimulus and assistance packages to protect the livelihood of the rakyat and survivability of businesses during the extended movement control order.

"This situation requires the government to optimise its financing to provide certainty in managing cash flows, given the slower revenue performance that limits its fiscal space," says the report.

Further, given the need to service its increasing financial obligations arising from liabilities, the government had to look for an alternative financing option that was readily available and would not incur additional debt burden in the short- and medium-term.

The report notes however that the government will only utilise the accumulated profit and not the accumulated contribution of the fund.

"The governments intention is not to burden future generations with debt if procurement of vaccines is to be financed through additional borrowings," it says.
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