Country Needs Prudent Expansionary Fiscal Policy

Economist Dr Jomo Kwame Sundaram says the country urgently needs a developmental, counter-cyclical fiscal policy as there is a clear consensus that the global economic situation is worsening.

He expects Malaysia’s economic prospects to be bleak in the near term; therefore, introduction of a more expansionary fiscal policy is now necessary, one that is nonetheless prudent, and not profligate.

Dr Jomo insists that fiscal consolidation in the face of recession is foolhardy, and that the medium-term fiscal position will be improved by short-term spending. Fiscal spending serves two main purposes, namely to serve as a buffer against the economic downturn in the short-term, as in late 1997, and to lay the foundations for medium-term economic progress.

Noting that public spending will shape growth recovery, he suggests four priorities. Topping the list is social protection. He says effective programmes to improve health, welfare, education and training should be expanded.

In this connection, he argues that the Education Ministry’s school feeding programme has tremendous transformative potential as a school lunch programme. Adequate preparation and good design can ensure that such a programme enhances the nutrition, learning and culture of the next generation.

He suggests that the food procurement policy to obtain safe and healthy local vegetables as well as fruits be used to transform smallholder food agriculture. He also suggests improving social protection and nutrition programmes for pre-school children.

This, he suggests that healthcare should be financed from tax revenue as all insurance options are more costly and most promote opportunistic behaviour.

Lastly, he suggests more effort in investment and technology promotion, especially renewable energy, such as photovoltaic solar panels and palm oil biodiesel, healthy organic biofortified food products as well as generic medicines, especially for tropical diseases neglected by Western pharmaceutical giants.

Jomo warns that poor government spending will discredit public policies and cause further problems later. He cautions that buying over existing assets does not enhance economic capacities, capabilities and output. Citing ECRL as example, he said investing more in the corrupt investments of the previous government will not improve them.


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