Go back to zero base, economist tells govt

‘Time to see what expenses can be cut off or down’

PETALING JAYA: The government has a price to pay for imposing a total lockdown and must go back to zerobase of its expenditure to see what it can afford to cut, says economist Tan Sri Lin See Yan.

The former Bank Negara Malaysia deputy governor said there might even be a need for non-populist moves such as taxing the rich and borrowing money to sustain the expenditure until the economy could be revived again.

“Every bit of expenditure must be justified honestly.

“This is the best time for all government departments and agencies to go to the zero base of their expenditures and see what they can cut off and what they can cut down.

“This has never been done before and will yield the government some savings, which it can use to pay for the necessary costs during the lockdown,” said Lin yesterday.

He said it was easy to say the government would give aid, but one must also know where the money would be coming from.

“When there are government agencies with employees mostly working from home, there is no need for all lights and air conditioning to be on or be left on at night at the workplace.

“This is the time to tighten your belts. The government can announce other forms of incentives for government departments and agencies that manage to cut down their finances during this time,” said Lin.

He said taxing the rich might also bring in money for the government to be used to help the poor as they struggle during the lockdown, but it might not be a popular move.

“The government can borrow, but the borrowings must be used strictly for capital expenditure and to curb deficits for very bad years,” he said.

He added that while there were calls for loan moratoriums, one must also look at how banks would be able to survive.

“Consider the lending side of the banks and see if they can afford it. As long as the depositors are not withdrawing, then they can survive.

“If depositors start withdrawing because interest rates are cut, then we are in trouble,” said Lin, stressing that at the end of the day, it would be the poor who would bear the brunt of the lockdown when the economy was bad.

Prof Dr Yeah Kim Leng, an economist at Sunway University, said he believed the government still had fiscal capacity to increase deficit spending and accommodate higher debt levels.

The economy would only collapse when there was total loss of confidence in the government’s ability to manage the economy and public finances, he said.

“As soon as the economy normalises, the government can embark on a more aggressive fiscal consolidation strategy to compensate for this unexpected Covid-19 shock more than a year into the pandemic.

“As long as the country can maintain investor confidence by assuring economic recovery and containment of the pandemic, temporary increases in government spending and debt levels are acceptable.

“Most Malaysian government debts are denominated in local currency and there is surplus domestic savings to finance the larger deficit.

“A case in point is that many developed countries, including the United States, have spent massively, and their debt levels have risen above 100% of gross domestic product, without worrying about debt default,” said Yeah.

“This has never been done before and will yield the government some savings.” Tan Sri Lin See yan