Dipping into National Trust Fund shows lack of govt effort, says economist

“It’s quite alarming that the finance minister is saying there is a crisis when he had previously been reassuring us that the economy was in good shape and fixed for healthy growth this year. So this appears to be mixed messaging”

(FMT) – Economists have criticised the government’s decision to dip into the National Trust Fund (KWAN) for Covid-19 vaccine expenses, saying the move not only raises concerns about the status of public finances but also the democratic process in the country.

This comes after finance minister Tengku Zafrul Aziz said the government will only take RM5 billion from KWAN for Covid-19 vaccine procurement.

He said this includes the RM3 billion for vaccine purchase first announced in his 2021 annual budget speech.

Barjoyai Bardai of Universiti Tun Abdul Razak said it was convenient for the government to use the emergency powers to amend the National Trust Fund Act to tap into the resources.

“The question is whether this is not seen as a breach of fiduciary duty and trust on the part of the government against the people’s trust,” he told FMT.

Barjoyai said the move reflected the government’s “lack of effort” to solve financial problems, adding that there were many other options to fund the vaccination programme.

These included requesting a supplementary budget or contribution from the public and the corporate sector.

Carmelo Ferlito of the Center for Market Education said the government should not make any spending decision without parliamentary oversight.

“It would be appropriate that Parliament is allowed to sit and that the government reports in detail about the status of public finances,” he told FMT.

Ferlito said the move would affect the confidence of both local and foreign investors.

He said the government must come up with a plan to restore the finances, adding: “This plan needs to contain both a short- and long-term strategy.”

Tengku Zafrul said the Perikatan Nasional-led government had inherited over RM1 trillion in liabilities and loans without repayments, including those linked to 1MDB and SRC International Sdn Bhd.

He said the government was facing financial constraints in addressing the current public health crisis.

However, Geoffrey Williams of the Malaysia University of Science and Technology said the country’s debt should not be used as an excuse to dip into the trust fund.

“It is alarming that he is referring to RM1 trillion in debt and liabilities which had previously been identified by Pakatan Harapan. The government debt limit is self-imposed and is not binding.

“Actually, the debt limit would hardly be affected by RM5 billion for the vaccine (procurement). Therefore, it does not sound like a convincing explanation for the use of KWAN.”

Williams also questioned Tengku Zafrul’s contradictory announcement on the country’s economic growth.

“I think there needs to be further clarification on why he is now admitting that the government has very little fiscal space.

“It’s quite alarming that the finance minister is saying there is a crisis when he had previously been reassuring us that the economy was in good shape and fixed for healthy growth this year. So this appears to be mixed messaging,” he added.