Latest news with #fiscalreforms
Free Malaysia Today
3 days ago
- Business
- Free Malaysia Today
Fiscal reforms will boost social protection funding, says economist
The Sumbangan Asas Rahmah (SARA) programme is one of several government initiatives aimed at easing the burden on vulnerable groups. PETALING JAYA : Fiscal reforms, including the expansion of the sales and service tax (SST), will boost social spending and allow Putrajaya to deliver targeted aid to a wider population, says an economist. Madeline Berma, a senior fellow at Institut Masa Depan Malaysia, said the country would struggle to strengthen its social safety nets without the additional revenue. Malaysia is among the lowest tax-revenue collectors in Southeast Asia. Madeline said Malaysia's tax-to-gross domestic product (GDP) ratio stood at just 12.5% last year, well below the Organisation for Economic Co-operation and Development's average of 34.1%. Madeline Berma. 'Malaysia's inadequate social protection stems from several factors, including low tax revenue and income inequality. 'In terms of social spending as a percentage of GDP, Malaysia lags behind both high- and upper-middle-income countries,' she told FMT. 'Fiscal reforms – including increasing tax revenue – are vital to creating enough fiscal space to boost social spending and deliver more targeted assistance.' Madeline said the SST expansion, which kicks in on July 1, is projected to increase tax revenue by more than RM5 billion. She said this will allow Putrajaya to channel additional funds to direct cash assistance programmes, such as Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA). She also said the higher tax revenue could be used to finance improvements to infrastructure and public services, which would in turn raise productivity levels and help narrow the gap between the rich and poor. Such fiscal reforms, she added, could help resolve two major shortcomings in Malaysia's social protection system – insufficient coverage and inadequate benefits. 'This is especially relevant for informal workers and in addressing gaps in retirement, health and injury coverage,' she said. Treasury secretary-general Johan Mahmood Merican previously said the expansion of the SST was necessary to strengthen Malaysia's fiscal position by increasing revenue for better social protection – without burdening the majority of the population. He said the move was expected to benefit 5.4 million lower and middle-income Malaysians. On June 9, the finance ministry announced that essential goods would remain tax-exempt, while a 5% to 10% SST would apply to non-essential items such as king crab, salmon, truffle mushrooms and imported fruits. The scope of the service tax will also be widened to include rentals, leasing, construction, financial services, private healthcare and private education. However, public healthcare for Malaysians will remain SST-exempt. Addressing the potential impact of the expanded SST, Madeline acknowledged that some companies may pass on the increase in costs to consumers. However, she expects the impact to be minimal, since essential goods are not affected. Expand post-retirement protection Barjoyai Bardai. Meanwhile, economist Barjoyai Bardai proposed that workers who have contributed to the Social Security Organisation (PERKESO) for more than two years be eligible for protection after retirement, as part of a comprehensive long-term social protection plan. The academic at the Malaysian University of Science and Technology called for such contributors to be given a pension equivalent to half of their last drawn salary. He also suggested making contributions mandatory for micro, small and medium enterprise owners and self-employed individuals – including farmers, fishers and service providers – under a takaful scheme, to ensure effective protection.
Arab News
10-06-2025
- Business
- Arab News
Pakistan to unveil national budget today as it eyes sustainable growth
ISLAMABAD: Pakistan's coalition government will unveil the national federal budget today, Tuesday, for the fiscal year till June 2026 with Islamabad eyeing sustainable economic growth and vowing to continue ahead with painful fiscal reforms to ensure that. The budget comes a day after the government unveiled the annual Economic Survey, a pre-budget document assessing the economy's trajectory over the past year, which said Pakistan's economy is expected to grow 2.7 percent in the outgoing fiscal year, missing Islamabad's 3.7 percent target. The budget every year highlights the government's plans to raise revenue, outlines its expenditures, states inflation and growth assumptions as well as allocations for several areas such as defense, education, health and other sectors of the economy. 'The Federal Budget for the next fiscal year will be presented in the National Assembly on Tuesday,' state broadcaster Radio Pakistan reported, adding that the lower house of parliament will meet at 5:00 p.m. for the session. 'Finance Minister Muhammad Aurangzeb will present the Federal Budget in the National Assembly and later he will lay a copy of the Finance Bill, 2025, containing the Annual Budget Statement before the Senate.' The budget comes as Pakistan undertakes efforts to navigate a tricky path to economic recovery. The South Asian country, which came to the brink of a sovereign default in June 2023, has since then undertaken painful macroeconomic reforms that it credits for gains such as a low inflation rate, increasing investors' confidence in the stock market and current account surpluses. Pakistan has vowed to stay the course of long-term reforms, which include widening the tax net, taking steps to privatize loss-making state-owned assets, slashing subsidies and undertaking reforms in energy and other vital sectors. An International Monetary Fund (IMF) team concluded its visit to Pakistan last month after discussions with authorities regarding the budget, broader economic policy and reforms under its ongoing $7 billion loan program for the country. The IMF last month approved the first review of Pakistan's loan program, unlocking a $1 billion payment. A fresh $1.4 billion loan was also approved under the IMF's climate resilience fund. The IMF's loan is vital for Pakistan which is trying to revive its debt-ridden economy. In a televised news briefing on Monday afternoon while releasing the Economic Survey, Aurangzeb reaffirmed the government's commitment to implementing IMF-backed structural reforms to transform the fundamentals of Pakistan's economy. 'The DNA of Pakistan's economy has to be fundamentally changed through tax and energy reforms that have started showing remarkable results,' he said. According to the survey, Pakistan's revenues rose sharply over the past year. It said tax collections increased by 26.3 percent to Rs9.3 trillion ($32.9 billion), while total revenues stood at Rs13.4 trillion ($47.5 billion). The primary surplus also improved to 3.0 percent from 1.5 percent. Government expenditure during this period rose to Rs16.3 trillion ($58 billion), with current and development spending increasing by 18.3 percent and 33 percent, respectively. On the external front, Pakistan recorded a sharp turnaround in its current account, moving from a $1.3 billion deficit to a $1.9 billion surplus, driven by improved exports and record remittance inflows.
Arab News
19-05-2025
- Business
- Arab News
Pakistan explores collaboration opportunities with UAE-based banks for economic growth
KARACHI: Finance Minister Muhammad Aurangzeb on Monday held meetings with three UAE-based banks which concluded with both sides expressing their desire to explore potential avenues for collaboration for economic growth, Pakistan's finance ministry said. The ministry held a series of virtual meetings with three UAE-based banks, Sharjah Islamic Bank, Abu Dhabi Islamic Bank, and Ajman Bank. The meeting, chaired by Aurangzeb, focused on the banks' support for Pakistan's development and fiscal objectives, the finance ministry said. 'The meeting concluded with mutual interest in continuing the dialogue and exploring potential avenues for collaboration,' the finance ministry said. 'The finance minister reaffirmed Pakistan's openness to quality commercial partnerships that contribute to economic growth, development financing, and investor confidence.' Aurangzeb said Pakistan is on the path to macroeconomic stability. He noted that this year, Pakistan's forex reserves are approaching the $14 billion mark, which would provide the nation with three months of import cover. Pakistan has undertaken structural, financial reforms in recent months mandated by the International Monetary Fund (IMF) in exchange for bailout programs from the international lender. These include increasing its tax base, introducing reforms in the energy sector and privatizing loss-making public assets. Aurangzeb underscored that the government is 'firmly committed' to long-term reforms. 'We have broken away from the old boom and bust cycle,' the minister said. 'The current stability is backed by difficult but necessary reforms— and we are staying the course.' He shared that Pakistan is set to reach a tax-to-GDP ratio of 10.6 percent by June 2025, with a target of 11 percent in the next fiscal year, the ministry said. 'During the interactive sessions, senior executives of the three banks acknowledged the progress and shared their comments and views on Pakistan's economic plans,' the statement said. The UAE is Pakistan's third-largest trading partner after China and the US, and a major source of foreign investment, with over $10 billion invested in the last two decades. The Gulf country is also home to over a million expatriates from Pakistan, the second-largest overseas Pakistani community globally, and a major source of remittances.
Arab News
08-05-2025
- Business
- Arab News
Fitch affirms Jordan at ‘BB-' with stable outlook as reform momentum builds
RIYADH: Jordan's long-term foreign-currency issuer default rating has been affirmed at 'BB-' with a stable outlook by Fitch, citing the country's macroeconomic stability and progress in fiscal and economic reforms. The US-based credit rating agency added that the grade, along with the stable outlook, also reflects Jordan's resilient financing sources — including a liquid banking sector, a robust public pension fund, and continued international support. Despite the stable outlook, Jordan's credit rating remains lower than that of several other countries in the region. In February, Fitch affirmed Saudi Arabia's IDR at 'A+' with a stable outlook, while the UAE was rated 'AA-.' In its latest report, Fitch stated: 'The ratings are constrained by high government debt, moderate growth, risks stemming from domestic and regional politics, and current account deficits and net external debt that are higher than rating peer.' According to the agency, a 'BB' rating signifies elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time, although some business or financial flexibility exists to support the servicing of financial commitments. The report noted that Jordan's government remains committed to advancing its three-pillar reforms across the economic, public administration, and political sectors, despite external pressures. Fitch added that the pace of reform will continue to be influenced by the need to preserve social stability, resistance from vested interests, and institutional capacity constraints. Jordan's gross domestic product expanded by 2.5 percent in 2024, and Fitch projects growth of 2.7 percent in 2025 and 2.8 percent in 2026. 'This reflects our assumptions of headwinds from weaker global growth, partly balanced by recovery in tourism from Europe following an easing of regional conflicts. Iraq will remain a dynamic export market for Jordan and nascent trade with Syria could add further impetus,' the report said. In April, the International Monetary Fund offered a similar projection, forecasting 2.7 percent growth in 2025, driven by a rebound in tourism and improved domestic demand. Fitch also noted that the imposition of US tariffs and the resulting uncertainty will slow global demand, which is expected to impact demand for Jordanian exports. Exports to the US accounted for 26 percent of Jordan's total in 2024, including 27 percent from precious metals and stones — categories that are exempt from duties. Apparel made up 56 percent of Jordan's exports to the US, and this sector faces the risk of a 20 percent tariff. According to Fitch, the general government deficit stabilized at 2.4 percent of GDP in 2024, amid higher interest payments and lower capital expenditure. The agency projects the deficit will rise to 2.6 percent in both 2025 and 2026, as continued spending restraint is offset by growing interest costs. The report further warned that persistent geopolitical risks could negatively impact Jordan's credit profile, even as it benefits from strong multilateral and bilateral support. 'As tensions between Israel and Iran remain heightened and the war in Gaza continues, geopolitical risks remain high. Uncertainty remains regarding the course and duration of the conflict,' said Fitch. Other factors that could weigh on Jordan's credit rating include a weakening of support from external partners and a marked increase in external indebtedness. Jordan is on track to receive disbursements under its four-year, $1.2 billion Extended Fund Facility with the IMF. It has also entered into a new program with the EU, which includes €1 billion ($1.07 billion) in macro-financial assistance. Fitch identified several factors that could lead to a rating upgrade, including a sustained decline in government debt as a share of GDP and a return to growth levels above pre-pandemic averages, resulting in lower unemployment.
