By Syed Jaymal ZahiidAugust 12, 2013UPDATED: August 12, 2013 04:05 pm
Anwar says people will have to pay more for consumer goods once Putrajaya introduces the GST.PETALING JAYA, Aug 12 — Putrajaya will punish the average citizen with new taxes in its bid to stave off a ratings downgrade, Datuk Seri Anwar Ibrahim alleged today, rather than cut spending and eliminate wastages.
Last Wednesday, international rating agency Fitch Ratings cut its outlook on Malaysia’s sovereign debt to “Negative”, citing gloomier prospects for reforms to tackle the country’s rising debt burden following a divisive election result this year.
Today, the opposition leader predicted that voters will soon be forced to cope with higher prices for consumer goods once Putrajaya rolls out the contentious goods and services tax (GST).
Anwar had in the past argued that the new tax scheme was unnecessary, saying much of the country’s high debt pile could be efficiently reduced by reining in corruption.
“When Fitch downgrade the rating it will make loans (to the government) higher... in the billions of ringgit so the government will move to cut spending and ultimately the people will bear the burden,” Anwar, once a finance minister and now adviser to opposition party PKR, told a press conference here.
“All these things can be dealt with if we cut corruption, implement better governance and financial management. But what do you do? You embark in new adventures like the GST and the minister will say no we don’t burden the people.
“You collect RM27 billion from the people and you say you don’t burden them,” he added.
Fitch’s revision from a stable outlook adds to concerns over Malaysia’s high debt pile at a time when the currency has been pressured by bond fund outflows and talk of the US Federal Reserve ending its easy monetary policy.
In its downgrade, Fitch had singled out the lack of political fortitude to see through necessary reforms.
“Prospects for budgetary reform and fiscal consolidation to address weaknesses in the public finances have worsened since the government’s weak showing in the May 2013 general election,” Fitch said in a statement.
This includes the need to introduce GST and cut subsidies to bring down its debt. Malaysia’s debt-to-GDP ratio currently stands at a worrying 53 per cent.
The opposition, however, had opposed the idea, insisting that the deficit can be reduced through prudent management and weeding out corruption.
Najib had downplayed the downgrade as a temporary setback that will be addressed in next year’s Budget.
Economists said Putrajaya now needs to send a strong message with Budget 2014 to dispel doubts about its intention to keep the economy on track and failure to deliver the necessary reforms to assuage outside observers such as Fitch may carry severe repercussions.
Meanwhile, the Fitch outlook downgrade appeared as other warning signs began surfacing over Malaysia’s slowing economy: slowing export growth, a falling trade surplus, and a ringgit at a three-year low against the US dollar.
It presents a dilemma for Najib who must now address soaring national debt — currently at 53 per cent of GDP, just under the 55 per cent ceiling — while needing to keep the economic engine room churning to avoid sending the country into a recession.
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