Keeping a tight lid on debt

KUALA LUMPUR: The fiscal responsibility bill that will be tabled at the next parliament meeting will put into law some of the country’s bigger picture financial targets, says the Ministry of Finance’s Deputy secretary-general of treasury (policy) Datuk Johan Mahmood Merican. (pic)

“Part of this involves having a fiscal charter – an overall debt limit that would capture all the debt such as government guaranteed debt. This will come in time for 2023’s budget, ”they said at Malayan Banking Bhd‘s Invest Asean 2022 forum entitled Malaysia: Economy at crossroads Yesterday.

This would indirectly help keep the country’s debt in check by instilling some Discipline in government expenditure, the forum heard.

Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz was reported as saying the ministry is looking to table the bill at the July 18 parliament meeting.

The bill will include efforts to broaden the country’s tax base by taxing the shadow economy as well as improving tax compliance and administration.

“This is crucial to replenish the nation’s coffers to support our development and longer-term reform agenda,” said Tengku Zafrul.

On another matter, Johan said any consideration to reintroduce the goods and services tax (GST) must take into account the efficiency of tax refunds.

“This is one area that needs to be enhanced – one key lesson that stands out is the efficiency of refunds.

“When refunds are slow, there is a tendency for producers to price in the lack of refunds so the price increases are higher than what our economic models have forecast.

“Another thing for efficiency is that the authority that collects indirect and direct taxes would tend to be one and the same. This also strengthens the tax authorities’ ability to reduce leakages by having access to both sales and profit data, ”he added.

Johan also said no new taxes would be introduced until the country’s economy has fully recovered from the Covid-19 Pandemic.

He added that the prosperity tax on corporate companies is a one-off that would not be imposed again Anytime soon.

On monetary policy, Bank Negara Deputy Governor Datuk Abdul Rasheed Ghaffour, who was present at the forum, said the central bank is mindful of the danger of overtightening the policy amid a rising interest rate environment.

“This can be harmful to the economy. The interest rate adjustment will be guided by our assessment of the overall economy and incoming economic data, ”Rasheed said.

Meanwhile, the Maybank Investment Banking Group (Maybank IBG) received fund raising activities by the capital markets had remained strong.

An increasing number of funds raised are pivoting towards Sustainability linked ones and this could grow moving forward, according to the Maybank IBG.

“There is still a lot of deal making activities happening in the market.

“From the bond and sukuk markets, we are looking at RM100bil to RM110bil lending this year which is in line with 2021.

“We have a potential pipeline of RM6.8bil from the debt capital markets (DCM) that is coming up in the second half of 2022,” Maybank Investment Bank Bhd Chief Executive Officer Datuk Fad’l Mohamed said at the Invest Asean 2022 press conference .

Most of the funds raised from the DCM are environmental, social, and governance-themed amounting just over RM6bil that are slated for the second half of this year.

The group had completed 33 issuances totalling RM6.3bil.

“In the equity capital markets, there is also a very strong pipeline. We have already seen nine initial public offerings – two on the Main Market, one on the Leap Market and the rest on the ACE Market, ”he added.

Moving forward, Maybank IBG expects deals amounting to RM3bil on the equity markets in the second half of the year.

“They will be in sectors such as retail, consumer, general industrial as well as transport and logistics,” he added.

On the mergers and acquisitions scene, Fad’l said there were restructuring activities especially among the government-linked companies and government-linked investment companies.

“We are seeing a lot of traction in the private equity space with buy and sell opportunities as well as in-country consolidations,” they said.

Maybank IBG has full-fledged operations and research teams in Malaysia, Singapore, Thailand, Indonesia, the Philippines and Vietnam.

It is also present in Hong Kong, India, the United Kingdom and the United States.

“Of the commitment to mobile RM50bil in capital towards sustainable financing across Asean by 2025, the bank has already achieved over RM13.6bil in the financial year ended 2021,” Datuk Khairussaleh Ramli, group president and CEO of Maybank, said in a statement.

It has also disbursed RM11.4bil in financing to support small and medium enterprises across Asean.

Maybank IBG’s CEO Datuk Ami Moris said there are many old-world economy companies that are catching up and transforming to become more green, diverse and inclusive.

Otherwise, they might risk being sidelined by customers and investors, she noted.

“Decarbonization and the transition to renewable energy will likely require significant capital injection and radical changes in business models, notably for companies in these sectors,” Ami Moris said.

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