Read the extracted news report below and answer the following question. Malaysias Fiscal Policy Supports Strategy for
Question:
Read the extracted news report below and answer the following question.
Malaysia’s Fiscal Policy Supports Strategy for Economic Recovery and Growth 27 May 2021
In terms of Malaysia’s fiscal position, the Government has revised the deficit target from 5.4% to 6% of GDP for 2021, having factored in continuing measures from 2020 economic stimulus packages, as well as the PERMAI and PEMERKASA packages launched in the first quarter of this year. Consequently, the overall Federal Government debt is expected to remain at approximately 62% by end-2021, while statutory debt (which comprises of MGS, MGII and MITB) is estimated to increase from 58% in 2020, to 58.5% by end-2021. This is still below the statutory debt limit of 60%, which was approved by Parliament in August 2020. The country's debt profile remains favourable with more than 90% of Government debt denominated in Ringgit, supported by ample domestic liquidity and long maturity issuances which supports funding flexibility. The Committee also discussed reform initiatives, including the Fiscal Responsibility Act framework as one of the measures to enhance management, governance and accountability in public finances.
The Government's current priority is to protect lives from the threat of COVID19, while also ensuring the country’s economic recovery agenda is on track, underscored by the principles of prudent financial management. Enhanced efforts towards fiscal consolidation measures will be implemented in phases in the medium to longer-term, when our economy is firmly on its recovery and growth trajectory. This strategy will ensure that we balance short-term fiscal requirements with long-term fiscal and economic sustainability by, among others, spurring high-impact quality investments and diversifying our revenue base. The Government is confident its fiscal strategy will ensure that economic growth prospects remain strong in the medium to longer term to fulfil the country's development agenda and achieve our Shared Prosperity Vision.
Source: https://www.mof.gov.my/en/news/press-release/malaysia-s-fiscal-policy-supports-strategy for-economic-recovery-and-growth
Refer to the extracted article above. In the context of Malaysia’s high capital mobility, trace through the likely effects of this fiscal consolidation measures within the IS-LM-BP framework.
