Much has been written already about the new budget, I won't repeat what has been said. There is just one item (a major one) that I don't like at all, for the 15th time in a row there will be a budget deficit:
1998: Deficit
1999: Deficit
2000: Deficit
2001: Deficit
2002: Deficit
2003: Deficit
2004: Deficit
2005: Deficit
2006: Deficit
2007: Deficit
2008: Deficit
2009: Deficit
2010: Deficit
2011: Deficit
2012: Deficit
It started in 1998, which was understandable with the huge Asian crisis going on, in 2000/1 there was the internet bubble, in 2003 there was SARS and in 2008/9 the Western financial crisis. But all the years in between, why was there a need for deficits, economic growth was fine? About 40% of the government revenue in Malaysia is from oil and gas, and social services are much less than in Western countries. A country like Malaysia should not have a structural deficit, in the contrary, being so lucky with having oil and gas.
According to this article:
http://www.efnasia.org/index.php?option=com_content&view=article&id=304:tough-but-necessary-actions-needed-in-budget-2012&catid=1:latest-news&Itemid=4
Malaysia's debt is currently about RM 362,000,000,000 (362 Billion), that is close to RM 13,000 per Malaysian citizen or RM 65,000 per family of five. These are huge numbers and have to be paid back somewhere in the future.
Dear M.A. Wind,
ReplyDeleteHow was the budget like in the years prior to 1998? Were we ever on a balanced or surplus budget?
I'm worried we're likely headed the same way as Greece when our natural resources run out.
I did see the numbers somewhere, forgotten where, there were indeed a few years with a surplus before, but before that also lots of deficits.
ReplyDeleteInterest rates are currently low, so there are not yet real problems, but what will the interest rate be in 3, 5 or 10 years? Nobody really knows, I would not be surprised if it is much higher, in which case it would be much more expensive to roll over the debt, and the problems do start. Just imagine 10% interest rate, just servicing the debt alone would already cost 40 Billion per year.
Hmmm... I suspected as much.
ReplyDeleteYou're right. Malaysia, unlike the US can't go on a printing spree without severe devaluation on the ringgit. Spending more than one earns is an unsustainable path.
Unfortunately, I doubt things will change at all until it's too late to do anything about it like Greece.
Deficit means one is spending beyond his means. In my case, I had to cover by borrowing and charge my properties as securities. If I continue the habit my property will be auctioned or finally be made a bankrupt. If government spend beyond their earning capacity they will have to borrow and borrow and pass on the burden to its citizen through myriads of taxes or withdrawing subsidies with promises that next budget will be better. With debts snowballing year after year for 15 years and the citizens are always at the receiving end who will guarantee that the country will not go bust? Solution? Citizens should act before it's too late. How? .........
ReplyDeleteThe only good thing is that Malaysia is borrowing in RM. In other words, Malaysia can simply print money to pay back the money it owes, so it does not need to go bankrupt. Printing of money will lead to more inflation. The poor anyhow have next to nothing, the rich will have parked a part of their money overseas, but it will be the middle class that will suffer.
ReplyDeleteIt is not yet hopeless I think, but things simply have to change, no wealth is created by running deficit after deficit, in the contrary.