(Melaka, Sunday): On Friday, Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim, announced an emergency financial package as an urgent measure to stem a runaway loss of confidence, resulting in a free-fall of the ringgit to an all-time low of US$1=3.865.
I welcome the emergency financial package as I had as far back as end of October called on Anwar to present a second 1998 Budget as the 1998 budget he presented in Parliament on Oct. 17 had failed in its objective to restore confidence, with both the KLSE Composite Index and the Malaysian ringgit plunging continuously downwards. In the past seven weeks since the budget for instance, the KLSE Composite Index had plunged from about 800 points before the budget presentation to around 600 points yesterday, touching as low as 512 during the period. The plunge of the Malaysian ringgit is even more shocking, from 3.17 against the dollar the day before the budget to the unprecedented low of 3.865 on Friday - a fall of 22 per cent. Compared to the Malaysian ringgit which was worth US$1-2.5 before the economic crisis, the Malaysian ringgit has fallen a walloping 54.6 %.
My quarrel with Anwar is not that he had come out with a second 1998 budget, but that he had not heeded my advice and come out with the emergency financial package five weeks earlier, which would have saved the Malaysian economy and the people from the financial devastation and losses suffered during this period.
In his second 1998 budget, Anwar revised downward the government projection for economic growth next year to 4%-5%, when only seven weeks ago, the projected growth for next year was 7%. The government has decided on a new target for the current accounts deficit, lowering from 4% of the GNP as proposed by the 1998 budget to 3% of GNP.
To achieve these objectives, Anwar announced a cutback of at least 18% of Federal government expenditure in 1998, beginning with an immediate 10% cutback across the board of both operating and development expenditure and 8% on a more selective basis.
I welcome this cutback as signifying that the government is, for the first time since the five-month economic crisis, becoming more serious in recognising the magnitude of the crisis which had afflicted the country and people.
During the Parliamentary debate on the 1998 Budget on October 20, I had criticised the 1998 Budget for missing the opportunity to send out a clear-message to the country on the need for belt-tightening.
I said that although the Government had reduced expenditure in the 1998 Budget by trimming the allocations of ministries and departments by two per cent, the operating expenditure for 1998 of RM45.6 billion would be well above the 1997 Budget allocation of RM42.7 billion, while the development estimates for 1998 of RM18.5 billion would also be above the 1997 Budget allocation of RM17.3 billion. The total 1998 budget of RM64.1 billion would still be much higher than the total 1997 budget at RM59.9 billion.
I said that a very clear message that the government was serious about belt-tightening was to ensure that the 1998 Budget would two per cent less than the 1997 budget, which would have meant a 1998 Federal Budget (operating plus development expenditure) of around RM58 billion.
My proposal that there must be an actual cutback in federal government spending next year as compared to the 1997 Budget was ignored at the time.
I therefore welcome the emergency financial package which would aim at a 18 per cent cutback in federal government spending next year, which would mean a cutback of at least RM11.6 billion from the 1998 budget of RM64.1 billion, so that the revised 1998 federal government spending would be in the region of RM52.5 billion - which would make it even lower than the original 1996 budget of RM55.4 billion.
It is important, however, that the second 1998 budget which includes the emergency financial package announced on Friday and other austerity measures to be announced by Anwar in Parliament tomorrow, should be properly enacted so as not to raise questions as to their propriety, legality or even constitutionality.
Parliament, for instance, should not be by-passed and MPs, whether government or opposition, must jealously guard the parliamentary prerogative to be the final authority in the land to decide on annual federal government spending.
As the 1998 Budget presented by Anwar to Parliament on Oct. 17 had not been approved by Parliament, and as the government has meanwhile decided on a RM11.6 billion cutback of at least 18 per cent in the proposed 1998 Federal Government spending, Anwar should withdraw his original 1998 Budgetary proposals in Parliament and present a second 1998 budget which incorporates the RM11.6 billion cutback