Will it be a gridlocked budget?

By admin-s On Nov 10, 2020

Although the Perikatan Nasional (PN) government received the King’s decree for the budget to be passed in the best interests of the country and people, the proposed document has not reflected this exhortation.

(The Edge) – On the first day of parliamentary debate, opposition leader Datuk Seri Anwar Ibrahim announced that the opposition may resort to rejecting the National Budget 2021, which was tabled last Friday, if it remains in the current form.

“We were asked to support the budget on the assumption that it was a Covid-19 budget,” said Anwar, implying that a lot more is needed to be done to overcome the pandemic and ease the burden of the people.

The Port Dickson MP called for more funds to be allocated to the Covid-19 fund by transferring a sum from the development expenditure allocation. The former finance minister also said initiatives such as the moratorium on loan repayment should be further improved.

With only a month to debate and daily parliamentary sessions cut to half day due to resurgence of Covid-19 cases, the question that has arisen is whether the budget would be passed in time to stimulate economic growth so that the country would not slump into a recession.

This question, which was never an issue for the previous two governments, arose as Prime Minister Tan Sri Muhyiddin Yassin has the support of only a small majority in Parliament.

RHB Investment Bank Bhd ASEAN economics research head Peck Boon Soon does not rule out the possibility of the budget being unapproved. He said consumers and investors would turn cautious should that happen, hindering the recovery which is expected to happen as soon as the current quarter.

“Although things are improving gradually and the economic situation in the country is still tough. A delay in the budget approval is likely to result in a relapse of the country’s economy,” said Peck.

RHB forecasts 7% gross domestic product growth in 2021 which will likely be driven by private investments.

UOB Malaysia’s senior economist Julia Goh concurred that the key risk, should the budget not be passed at the Parliament, is a significant economic fallout.

“Without the much-needed support at this critical juncture, the welfare of the people and businesses is at stake. The issue is more of the allocations and how the funds will be spent, given the size of the budget,” she added.

Meanwhile, veteran economist Tan Sri Ramon Navaratnam said that rejecting or delaying the budget approval will be counterproductive and regressive to the country’s economy. Not only will it be disruptive to the economy, but it will also undermine the fight against Covid-19.

“This has never happened, and this is a very ugly development. I think we can encourage the opposition to be critical but not to the point of disrupting the way forward,” said Ramon.

“From the way I see it, the budget is not perfect, and nothing is. But it doesn’t warrant or provide justification for rejecting or postponing the budget as there are no major policy differences,” he said.

Political commentators contacted by The Edge believe two things could happen if the budget is not approved: The prime minister must resign and allow for another leader to take his place, or he should call for a snap election if no clear agreement can be achieved on his successor.

This, said political analyst Khoo Kay Peng, will pose uncertainty in the short term but would allow for a new mandate to form and untangle the stalemate.

Still, it will have an adverse impact on the economy and the stock market, he said, adding that the budget is required for the government to fund the measures containing Covid-19.

On the other hand, opposition lawmaker Wong Chen opined that a delay in budget approval may not necessarily result in a collapse of the government. However, he said a budget defeat may be the only way to defeat the government.

According to convention, a defeat in a money bill like the budget must mean the government has to resign, said Wong. An election should then be called in 60 days. The debate on the budget would only resume after a new government takes office, he said.

“I think the likelihood of the budget being stopped is extremely narrow, given the circumstances even if there’s a political problem, the government will have excess money to continue,” said Wong.

He expects the government would go ahead with the proposed allocations should there be any delay in passing the budget.

“The government will run on a supplementary budget, special emergency budget or caretaker government budget, there is no issue… but the main question is whether there is enough allocation for [containing] the Covid-19 pandemic,” said Wong.

“By refusing to be receptive to views that cut across the political divide, PN is shooting itself in the foot. I wouldn’t be surprised if the budget fails to get passed, unless something happens that could prevent the opposition from gathering enough numbers on the day of reckoning,” said Ahmad Fauzi.