Malaysia to widen money inflow

In a statement, Finance Minister Lim Guan Eng said these measures are expected to address the country’s short-term financing needs, without adversely impacting economic growth.
Economists have lauded the government’s decision to trim its balance sheet by engaging in the sale of shares and land, and leasing of idle government assets and buildings.
Alliance Bank Malaysia Bhd chief economist Manokaran Mottain told StarBiz that the monetisation of the government’s non-critical and non-strategic assets would create a new stream of money inflow and help to deal with any shortfall in revenue.
“It makes sense for the government to do away with such assets that are non-productive and left idle. If the government continues to retain such assets, not only are there any significant returns gained, but the government will also have to bear the cost of maintaining the assets.
“The sale of shares is also another good option. Such divestments will reduce the government’s control in the stock market and offer more options for retail investors, thus improving liquidity,” he said.
Echoing a similar stance, MIDF Research chief economist Kamaruddin Mohd Nor said the government must identify proper non-strategic assets before monetising them.
“Asset monetisation should not be done just for the sake of it. Only those assets that do not provide good returns should be disposed. Relevant experts must look into the mechanics before deciding which asset to sell,” he said.
On the government’s plan to issue new bonds to support its financial needs, Kamaruddin described it as a “normal operation”.
He was asked whether the fresh debt issuances would put pressure on the country’s debt leverage, considering Malaysia’s liabilities that have soared past the RM1 trillion mark.
“The issuance of sovereign bonds is an ongoing process for any country. In the case of Malaysia, the abolition of the goods and services tax (GST), coupled with fuel subsidy, have put pressure on the country’s financial standing.
“The government clearly needs additional financial support despite the expenditure cuts. As long as the country’s annual debt services charges are maintained prudently with a proper borrowing strategy, the issuance of new debt will in fact be sustainable,” he said.
Finance Minister Lim assured that the additional debt issuance would be gradual as well as transparent to the market via announcements through the auction calendar as per current practice.
“This will ensure that investors would be able to absorb the additional issuances without major adjustments in yields that could increase the borrowing cost of the government,” he said.
 Elaborating on the government’s choice of financing options, Lim pointed out that the priority is towards finding the lowest financing cost.
“Second, the timing and size of fund-raising will be guided by the ability of the financial markets to absorb it in an orderly manner and avoid unintended consequences.
“Third, any form of strategy adopted will be focused on maintaining the overall confidence in fiscal sustainability and economic resiliency,” he said.
In his statement, Lim also announced the establishment of the Public Finance Committee (PFC), which will focus on strengthening public finances and driving the medium-term fiscal strategy.
Chaired by Lim himself, the PFC will also comprise Economic Affairs Minister Datuk Seri Mohamed Azmin Ali and Bank Negara governor Datuk Nor Shamsiah Mohd Yunus.
The top-level committee aims to balance the federal government’s fiscal responsibility, while at the same time ensuring continuous spending and investment for Malaysia’s future economic growth.
“This committee will also devise strategies and plans in managing fiscal challenges, given the abolition of the GST, all of which would be incorporated in a medium-term framework on fiscal consolidation,” said Lim.
On the delayed GST refunds, Lim said the government would honour the refunds gradually from 2019. Payments for small businesses will be prioritised, as they are likely to be most affected by the delay in the refund.
In response to the formation of the PFC, Manokaran said it should also include several representatives from the private sector to incorporate the views of all relevant stakeholders.