Of debt and taxes
Approaching the limit
We’re starting today’s BTL with something we just mentioned in brief in yesterday’s newsletter. In truth, most of the news media kinda missed playing this piece up.
Perhaps, like us, they were distracted by the drama of the ongoing battle between the Dr Mahathir Mohamad and Anwar Ibrahim. But the issue that follows is actually the more important one simply because it affects each and every one of us, which is why we’re looking at it in depth today.
Finance Minister Tengku Zafrul Abdul Aziz says the country’s debt could rise to the statutory limit of 55% of the gross domestic product (GDP) by the end of the year. At present, we are operating at 52% of GDP, following the implementation of measures meant to protect livelihoods and stimulate the economy after the country had to be partially shut down thanks to the Covid-19 pandemic.
These, of course, are the RM260 billion Prihatin and RM35 billion Penjana programmes, which bring the government’s direct fiscal injection to RM45 billion.
Tengku Zafrul, however, says the 97-98% of the debt is domestic, meaning there is very little exposure to foreign currency fluctuations. And the government, he says, is committed to maintaining strict fiscal discipline.
Earlier this month, the moneybags minister had said Malaysia aimed to borrow its way out of the economic slump brought on by the pandemic, and was open to increasing the debt ceiling beyond 55%, though he declined to say how much higher the government was willing to go.
But what does all this mean, especially for us plebs? Can the government afford all this? Will higher public debts lead to higher taxes?
Well, according to this article, a debt-to-GDP ratio of 60% is often noted as a prudential limit. The 55% ceiling we have, basically, is set by the government, so there is still room for it to be raised, though the Muhyiddin Yassin administration will have to seek Parliament’s approval to do this.
What the article also points out is that the growing debt means the amount the government will pay for repayment will rise as well, and it is already its third-largest budget line for operating expenditure. To cut a long story short, once the economy has recovered, the only way to avoid adding to the debt is to reduce budget deficits, and two ways to do this is to cut public spending and, more importantly to us little people, boost taxes.
So yes, peeps. While the gomen has no choice but to boost the economy that has suffered due to the pandemic, we have to realise that keeping such debts for too long will only increase national debt. What this could eventually translate to is an increase in taxes, though how much taxes grow is something only time can tell.
Increasing taxes, as we all know, has positive and negative effects. On the one hand, the public debt is managed better and the economy improved. On the other hand, it can lead to reduced wages, lower discretionary or disposable income, and even a decrease in productivity. This article explains it further, even if it is based on examples in the UK.
So, while we are certainly feeling the effects of the Covid-19 pandemic now, and the government is trying to do whatever it can to minimise that impact, it seems we may face a little more hardship in the future and will likely have to tighten our belts even more. This is especially so considering the International Monetary Fund has forecast an even deeper global recession than estimated earlier.
Regular slobs like us may suffer, but it looks like such things are no matter to some people – like Perak MB Faizal Azumu, for instance, who was recently spotted in a brand spanking new Lexus ES sedan. He said the state government bought the new car for him at a discounted price because one of the 16 Toyota Camry vehicles it has was sold to a state legal adviser when she retired, sort of as a parting gift.
Here’s the thing though. Those Camrys were only just purchased last year, and Faizal and the state government had come in for a lot of criticism for those purchases as well. Why the need to sell off one of the cars which are still relatively new and get a new one, even if it’s at a heavily discounted price? And, at a time like this when everyone is suffering?
Well, just like last year, the purchase of the Lexus also drew flak. Pakatan Youth took the opportunity to slam Faizal and gang for buying the car, calling it a selfish turn of events when thousands were jobless.
Back to school
Schools reopened yesterday for upper secondary students and apparently went A-OK with the “new normal” being observed throughout and even a surprise visit to one school by PM Moo.
But while things went smoothly yesterday, there was also a warning from the Health Ministry that any school found to have cases of Covid-19 would be shut down. The ministry, meanwhile, also said assessments would be made to see whether other students could be allowed to attend classes as well.
In other education-related news, the government will meet Friday to decide whether private tuition centres would be allowed to resume operations as well as whether suraus at schools will be allowed to open.
Meanwhile, the relaxation of restrictions under the RMCO continued yesterday with colourful baju minister Ismail Sabri Yaakob announcing that Muslims will be allowed to perform the ritual slaughtering of animals for Hari Raya Aidiladha, set for the end of July.
This follows the lifting of restrictions for social events beginning July 1. Also among the social events which will be allowed from July 1 are wedding ceremonies and birthday parties.
Ismail Sabri, however, threw a wet blanket over those whose foreign domestic workers are stuck overseas. They are still not allowed to return, one of the few restrictions it seems considering so many have been relaxed of late.
All of this brings us to one of the biggest questions he have about the RMCO: If the government had planned to ease restrictions before the Aug 31 deadline, why bother with the deadline? They could have just announced the RMCO and said restrictions will be situation-dependent and lifted as soon as possible. But hey, who are we to know? We’re just Lexus-less nobodies. 🤷
Anyhoo, here are a few other Covid-19 articles which appeared yesterday:
- For the second day in a row there was only a single-digit increase in new cases, with six detected for a total of 8,596 since all of this began. Recoveries again outweighed new cases, with 45 discharged (8,231 in total).
- Health DG Dr Noor Hisham Abdullah says there could be zero cases of Covid-19 by mid-July if the people obey all the SOPs set by the Health Ministry.
- The ministry is monitoring recovered patients who had been afflicted with serious cases of Covid-19. These “category five” cases could have long-term side effects such as lung damage and a weakened immune system.
- The government has released a set of dos and don’ts for when cinemas are allowed to reopen from July 1.
See you at the polling centre
So here we are again at a topic which is either the source of great consternation or great comedy for Malaysians, depending on who you ask.
It seems like we’ve been talking forever about that great stalemate between former PM Mahathir and his protégé-turned-enemy-turned-frenemy-turned-enemy again Anwar over who should be the Pakatan Plus candidate for PM should the coalition take Putrajaya again. Well, that obviously hasn’t been resolved yet (how can it when both insist they are the Chosen One?).
And now, we’ve been told that PKR would rather face snap polls than support Maddey’s vote of no confidence motion against PM Muhyiddin. This, say PKR insiders, is because the party wants to support its president, Anwar.
What this effectively means is that PKR is telling Mads to take a hike. We’re not gonna support your vote of no confidence, cos what that would lead to would likely be a vote of confidence in you as the next PM. So let’s call for snap polls and we’ll see which party comes out tops.
Despite all that posturing and positing, as well as the fact that fellow Pakatan parties DAP and Amanah and ally Warisan are supporting Mahathir, PKR sec-gen Saifuddin Nasution Ismail says the opposition coalition is still intact, as it was only a difference of opinion as to who should be head honcho. He also urged supporters to be patient and allow the member parties to work things out.
But how do you work things out when both sides don’t want to give in? Despite Amanah’s confidence it can repeat its feat of brokering peace between arguably the two biggest personalities in Malaysian politics, there really doesn’t seem to be any end in sight.
And if rumours are true that more PKR members are to leave the party en masse soon, we may also ask whether Anwar’s pride and joy can continue to be a force in Malaysian politics. This, too, after a suspended PKR assemblyman was confirmed as having been given the boot yesterday.
Well, Saifuddin seems to think PKR is still solid. This, despite the disciplinary action taken against supporters of former deputy president Azmin Ali, who is now a senior minister in the Perikatan government, he says.
Perhaps what he should have said was the party is still solid because it had moved to discipline naysayers and troublemakers. That would have been a bigger statement of power and intent. So yeah, we’re not as convinced as PKR top guns would like us to be.
All other things
As per usual, there were a number of news items which appeared yesterday which didn’t really warrant segments of their own but are important enough for us to include. So here they are in brief:
- The Human Rights Commission of Malaysia has made an urgent call for the government to review certain laws, including repealing the Sedition Act, addressing “hate speech” as only being an exception to freedom of speech when it comes to inciting hatred because of race and religion, and ending suppression of dissent.
- PAS is hopeful that it will soon receive good news in its goal of amending the Syariah Courts (Criminal Jurisdiction) Act to enable the implementation of Hudud law.
- The High Court has allowed the prosecution application to amend its charges against former PM Najib Razak and former 1MDB CEO Arul Kanda Kandasamy in the case against them for allegedly tampering with the company’s final audit report. Both have claimed trial under the amended charges.
- Malaysia’s favourite fugitive financier Low Taek Jho, affectionately known as Jho Low, is being protected by allies in China, according to the editor of Sarawak Report and a DAP MP, who seem to know more than our cops and Interpol.
- Amanah president Mohamad “Mat” Sabu’s 32-year-old son Ahmad Saiful Islam Mohamad has been sentenced to eight months in jail for a drug-related offence, after which he will be placed under police and National Anti-Drug Agency supervision for two years.
- Police have opened two investigation papers into alleged election offences so far in relation to the Chini by-election in Pahang. Meanwhile, Tasik Chini is set for major rehabilitation, the state government has announced. Ahhh, the wonders that elections bring!
- Lastly, the media will be allowed to cover Parliament in July … but they won’t be allowed to conduct doorstop interviews in the corridors of the august house. This is actually a bigger problem than it sounds because those interviews are crucial to cornering MPs and getting them to clarify, expand on and otherwise explain the shit the say.
“There are four things every person has more of than they know: sins, debt, years and foes.”
- Persian Proverb -
IN INTERNATIONAL NEWS
- Ahead of the July 10 general election, Singapore PM Lee Hsien Loong’s brother Hsien Yang has joined opposition party PSP. If you’re wondering just why the siblings are feuding, here’s an explainer to help you understand.
- The United Nations and the Arab League have called for Israel to abandon plans to annex parts of the occupied Palestinian West Bank.
- The police chief of Minneapolis says the killing of George Floyd was murder, adding that the former police officer who caused the death “knew what he was doing”. Meanwhile, the anti-racism protests sparked by the killing have even affected hit police comedy Brooklyn Nine-Nine, with several episodes reportedly binned.
- Democratic presidential nominee Joe Biden has opened up his lead over President Donald Trump, with a survey saying he has polled 50% to The Donald’s 36%.
- A new forecast predicts that the US will see 180,000 dead from Covid-19 by October. The virus seems to be spiralling out of control, with record increases of new cases in some of the country’s most populous states. Fears of a Covid resurgence caused the stock market to dip sharply yesterday.
- Meanwhile, India has reported a massive increase of 16,000 cases in a single day, forcing the government to call in the army to manage treatment facilities in New Delhi.
- A Tanzanian guy became an overnight millionaire after he found two Tanzanite rocks weighing 15kg in total. Tanzanite is one of the world’s rarest gemstones and we may be out of it within 2 decades. We’re glad Saniniu Laizer found those rocks, which he sold for RM12.7 mil, though – the man does have 4 wives and 30 kids to feed. But then again, he wasn’t exactly living on the breadlines before, considering he owns 2,000 cows.