The measures include a two per cent cut in expenditures for all ministries and agencies, with immediate effect; deferment of several mega projects like the RM13.6 billion Bakun hydroelectric project, the RM10 billion Kuala Lumpur Linear City project, the RM2.5 billion Northern Regional International Airport in Kedah, the Highlands Highway linking Genting Highlands to Cameron Highlands, the lengthening of the completion period of Putrajaya; and the review of all new privatised projects to ensure that they are needed for long-term growth and acceptable level of import contents.
The reversal of government policy last Thursday night, leading to a rally of the stockmarket on Friday and Monday, has been regarded in some quarters as a "return to sanity" with "pragmatism" setting a new course after the ferocious attack on foreign investors as manipulators and saboteurs out to wreck the country’s economy accompanied by abrupt policy changes which plunged the Kuala Lumpur Stock Exchange to an all-time low. Yesterday, Anwar said that the government intends to cut the current accounts deficit from 5% of the gross national product this year to 4% of GNP next year.
Economists have forecast the current accounts deficit this year to rise to 5.5% of the GNP.
To help improve the current accounts problems, the government has decided to increase oil production in the remainder of this year. It has been reported that Petronas has been directed to step up oil production by another 50,000 barrels per day to 680,000 bpd, which will bring in an additional RM3 billion in exports in 1997.
To show the government’s seriousness to bring the current accounts deficit under firm control, Anwar should set the target and time-frame to reduce the current accounts deficit to two per cent of the GNP in his 1998 budget speech in Parliament on Oct. 17.