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PETALING JAYA: The Institute for Democracy and Economic Affairs (Ideas) says the Public Finance and Fiscal Responsibility (PFFR) Act is a welcome move, as it aims to promote equitable growth in the economy as well as working towards sustainable policy-based fiscal planning.
The act spells out the Minister of Finance (Inc)’s (MoF) responsibility to ensure fiscal sustainability and stability.
Malaysia now joins countries like New Zealand, Brazil and the United Kingdom to have implemented fiscal responsibility laws with strong accountability measures, leading to better budget planning and improved fiscal outcomes.
“This law is a significant step towards improving our public financial management and ensuring budgets are justified to Parliament through sound economic planning,” Sri Murniati Yusuf, deputy director of research at Ideas, said in a statement.
The act promotes better fiscal discipline as it requires the publication of a mid-year expenditure performance report and the publication of a fiscal risk statement, she added. It institutionalises the publication of vital information for budget documents that are usually laid out before Parliament on budget day.
Ideas noted the mid-year expenditure report, a document disclosing the national budget’s performance halfway through the year, will help enhance oversight of the budget implementation.
“Its timely release deserves credit, as it enables parliamentarians to use the information for a more meaningful debate when formulating the following year’s budget.”
The think tank said with the act, Putrajaya has made an important step towards managing off-budget liabilities and it includes a limit to provision of guarantees to government entities, including public-private partnerships. Mitigation plans for troubled entities must be laid out to Parliament as well.
“The entities covered by the act unfortunately only refers to statutory bodies and companies under MoF and companies incorporated under the Trustee (Incorporation) Act 1952. These entities are required to submit financial statements to the Treasury.
Other government-linked companies (GLCs) under the control of statutory bodies reporting to other line ministries are not included. “We hope to see better guidelines for the management of the wider segment of GLCs as well, which could be formulated in a separate governing law for GLCs,” Ideas commented.
The research outfit welcomed the involvement of Parliament in approving a fiscal adjustment plan in a situation where fiscal objectives are not achieved.
It added the act could be stronger on transparency and accountability measures and provide better access for the parliamentarians to scrutinise various mid-term fiscal strategies.
Although the act highlights the obligation of the MoF to present key budget reports before Parliament for oversight, some provisions for key information do not require laying out to Parliament.
“There is no requirement for the mid-year expenditure performance report to be laid out in Parliament, which reduces the possibility that it would be brought to the attention of MPs for debate. Also, while the minister is required in Section 16 to formulate a policy on debt management, there is no corresponding requirement to disclose this policy in detail in the budget documents,” Ideas highlighted.
Sri Murniati also called for the House of Representatives to devote more time to ensure reform bills are given more holistic consideration and take into consideration the suggestions for improvement.
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