Budget 2023 should reduce subsidy spending, says IDEAS 

This will allow the govt to address the issue of rising cost of living and strengthen the country’s entire welfare system


THE Institute for Democracy and Economic Affairs (IDEAS) hopes the finalised Budget 2023 would be carefully balanced to address the rising cost of living.

It has called for the government to strengthen the country’s entire welfare system such as including social safety nets, inclusive pension schemes and both active and passive labour policies.

These can reduce the government’s tax burden in the long term, as they would also require market-funded initiatives and citizen input.

IDEAS economic and business unit director Dr Juita Mohamed said in a statement that grants should be a medium-term plan which would focus on the poor using post-pandemic data.

Furthermore, IDEAS also proposed to reduce the Constituency Development Fund (CDF) for fiscal prudence and hopes that all MPs have equal access to funds through a more equitable, rules-based allocation of the CDF.

The institute also suggested that the government to enact a CDF Act to ensure the public have access to details on the source of funding.

This also includes the rules and procedures for disbursement, contracting, reporting and tracking of CDF allocations. 

This law would bring greater accountability and encourage government agencies to play a greater role in social assistance and infrastructure support for those in need.

IDEAS also urged the government to explore new sources of revenue as fiscal consolidation should not depend solely on expenditure cuts. 

Its CEO Dr Tricia Yeoh pointed out that Malaysia’s public revenues are low and lagging compared to its peers.

“The International Monetary Fund recommends a tax yield of 15% of GDP as the minimum required for sustainable development, but in 2021 tax revenues as a share of GDP in Malaysia only stood at 11.2%. 

“This comes after a decade of steady decline from a high of 15.6% of GDP in 2012,” she said.

Yeoh also hoped that the government would revise personal income and services tax since its revenue is forecasted to drop this year on the back of moderating crude oil prices.

“The government should also urgently discuss the return of consumption tax alongside a revised social safety net,” Yeoh said.

Moreover, Yeoh also called for the government to prioritise healthcare and education funding.

“While IDEAS welcomes the increased allocation to the Health Ministry from 9.1% to 10.4% of the total budget from 2019 to 2022, Malaysia still spends relatively less as compared to its peers such as Thailand and Singapore,” she added.

The World Health Organisation recommends that the health expenditure of each country should be at least 5% of its GDP.

Hence, Yeoh said the new budget needs to increase its expenses on healthcare since it is always below 3%.

“As for education, IDEAS highlights the need for a nationwide study to investigate the impact of Covid-19 school closures on learning loss among students, particularly in marginalised and vulnerable groups, and to prioritise resources on addressing these impacts,” she concluded.