KUALA LUMPUR: The Public Finance and Fiscal Responsibility Act was passed in the Dewan Rakyat on Wednesday (Oct 11) after it was tabled for the second and third reading.
The bill was tabled for the first reading by Deputy Finance Minister I Datuk Seri Ahmad Maslan in the Dewan Rakyat on Tuesday (October 10).
One of the objectives of the Act was to reduce the fiscal deficit to 3%.
"We do not want to leave a legacy of debts for our future generations. Previously we were servicing 10% of our debts but it is now 16%," Ahmad Maslan said when winding up replies on the bill.
"This means we are currently paying 6% more and this means that the present generation will not be able to enjoy the 6% because of the debts incurred previously," he added.
Ahmad Maslan welcomed suggestions that a special parliamentary select committee was set up to look into fiscal matters. He said the government would consider the suggestion.
He informed the House that a Procurement Act would be tabled next year, to ensure proper procurement processes.
The bill seeks to spell out the responsibilities of the government in terms of governance and transparency in managing public finances and fiscal risk, especially in relation to revenue, expenditure, loans and debt.
According to Clause 5 of the bill, the Finance Minister was responsible for formulating and implementing the government’s fiscal policy with the main objective of ensuring the sustainability of public finances, preserving macroeconomics and safeguarding the well-being of the people.
The Finance Minister would also have to formulate a Medium Term Fiscal Framework, which would be a three to five-year projection of the government’s fiscal position and economic projections.
This would be supported by a revenue strategy and expenditure policy.
According to the fiscal objectives of the Act, the annual development expenditure should not be more than 3% of the Gross Domestic Product (GDP).
The government debt level should not be more than 60% of the GDP while the fiscal deficit should be at 3% or less.
Government guarantee should not exceed 25% of GDP.
The Act also provided a provision for the government to temporarily deviate from its fiscal objective if there is a sudden and unpredictable event that might pose a significant risk to human lives, economy and fiscal position.
However, this deviation must obtain cabinet approval and be tabled in Parliament.
In the event the fiscal objectives were not achievable, the finance minister would have to present an adjustment plan to Parliament for its approval.
If the plan was rejected by the August House, the Dewan Rakyat might instead pass a resolution to require the finance minister to improve on this fiscal adjustment plan which must be laid before the House.
A fiscal policy committee would also be set up to make recommendations to the cabinet in matters of fiscal policy.
The committee would be chaired by the Prime Minister and comprise his deputies, the Finance Minister, Economic Minister, chief secretary to the government, secretaries-general of the Treasury and the Economy Ministry, Bank Negara Malaysia governor and two other appointees with expertise in finance.
The minister must also table an economic and fiscal outlook report for every financial year to the House.
Ahmad Maslan said the goal of the Act was not solely to reduce the fiscal liabilities but it also entailed the Key Performance Index for fiscal targets.
Among the new responsibilities imposed on the Finance Minister, was that he would have to make public a mid-year expenditure performance report no later than Sept 30.
