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Some of the concerns about Budget 2022 seem to be too closely confined to a narrow range of problems.
There is, for instance, concern about whether or not the budget will be expansionary and on the desirability of raising the debt limit.
These are necessary questions, but not the only questions that have to be answered.
There is a broader range of issues that have to be explored, with emphasis on questions of a more fundamental nature.
There is no doubt that a great part of Budget 2022 will be directed towards mending the damage that was caused to household welfare due to the pandemic.
Similarly, the micro, small, medium enterprises (MSME ) sector was debilitated due to the impact of the health crisis and the subsequent lockdown.
As a consequence, it goes without saying that one can expect the B40 to receive attention in this budget, perhaps more than is customary.
The lockdowns have resulted in companies winding up and in job loss. A return to normal is not a quick and seamless effort as textbook curves would like us to imagine. Recovering from disruption will require support and this may benefit from a targeted approach (on a sectoral basis). It is a matter of discussion how the assistance will be extended.
Not all participants in the MSME sector should be treated similarly. There are companies that can rebound quickly as the economy picks up; there are others who may be able to do so only in the second half of 2022; and there are others who have probably shut down for good. The last category of companies requires assistance in quite a different manner from the first category.
Another set of questions will be related to the interaction between fiscal and monetary policy. As the economy improves, fiscal policy should recede in importance and, perhaps, monetary policy should take a more active role.
Monetary policy could have played a more aggressive role, particularly in regard to what financial institutions could have done. However, a more conservative stance was adopted.
More specifically, the support that was extended to households and companies will roll down as the economy grows. But the growth will not be uniform and it will not uniformly affect all sectors and all segments of the population. Fiscal policy will have to be fine-tuned to attend to this class of problems.
The third set of problems that have to be thought about is how Budget 2022 will interlock with the 12th Malaysia Plan (12MP). The 12MP is an ambitious plan that spans a longer time period. Can Budget 2022 share the same ambitions as the 12MP, at least in 2022? This will have to be made clear. A misguided sense of loyalty to the 12MP will not help. This is not a difficult issue though; it is only a matter of clear guidance and expectations formation to set out when and how Budget 2022 will support the goals of the 12MP.
There are some structural issues that have to be addressed, among them the faultlines in the healthcare system, the lack of a health financing policy, the question of undocumented and unskilled foreign workers, and the absence of robust social safety nets.
These problems cannot be solved in a year, but there is surely a point at which we can start examining and attending to them more seriously than we have done before.
One of the longer-term issues that we can start looking at is how we can reform the tax system. This will include trying to bring the informal sector under the purview of the existing tax system. There is an underground economy that is alive and has to be harnessed and made to contribute to government tax revenue. It is useful to push tax literacy and compliance to the hilt. There are also suggestions that less time is spent on administrative details within the tax system and more on collecting data analytics.
Budget 2022 can signal that we are ready to look beyond the usual expenditure-revenue grid.