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GST – A way out of debt dilemma

Amro economist Diana del Rosario (pic) said in a briefing that Malaysia “clearly needs to restore fiscal buffers” once the economic recovery is achieved. PETALING JAYA: Amid Malaysia’s burgeoning debt levels as the government resorts to borrowings to save the economy, the revival of the goods and services tax (GST) is seen as a much-needed lifeline for the country’s debt dilemma. Asean+3 Macroeconomic Research Office (Amro) said that the government’s aim to bring down the debt ratio to 55% of the gross domestic product (GDP) by 2023 would be challenging to achieve under baseline assumptions. However, with the reintroduction of GST, the government debt ratio could be lowered substantially as revenue base widens and the pace of fiscal consolidation is accelerated.

Alternative Views: Tapping KWAN can disrupt the government debt market ecosystem

Not many knew of the existence of the National Trust Fund (KWAN) until the government using its emergency powers decided to tap into it to procure Covid-19 vaccines and meet any other related expenses incurred. The fund was set up in 1988 to help build up the country’s wealth and prepare it when resources from oil and other commodities are depleted. It is also known as the National Heritage Fund. Towards meeting this objective, when crude oil was north of US$90 per barrel (and even breached the US$100 barrier) for a few years before prices collapsed in June 2014, Petronas contributed to the fund aggressively. Other commodity sectors such as timber, oil palm and rubber are supposed to contribute too but, so far, only Petronas has done so.

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