Public Finance and Fiscal Management in Malaysia
The state of public finance and the conduct of fiscal policy in a country are essential components of macroeconomic management. Together with the monetary policy, fiscal policy usually aims to support sustainable growth with full employment and price stability. However, these objectives may often demand strong policy coordination so as to achieve effective results in the shortest term possible. For this purpose, budgetary policy which, in developing countries, tends to be largely influenced by Keynesian economics, has to be deliberated in the context of the situation that prevails, having regard for the situation of supply, demand, economic policy and regulation in the country. Sometimes it is better to liberalise and deregulate to encourage the private sector to undertake expenditures, and sometimes addressing the tax system and structure may unleash latent potential that could lead to a vibrant entrepreneurship, and sometimes addressing the tax system and structure may unleash latent potential that could lead to a vibrant entrepreneurship and enterprise development. Thus budgetary deficits may not necessarily have to be incurred to energise the economy on track again, after a period of slack aggregate demand.
Author: Sulaiman B. Mahbob