Current Affairs, National

Sarawak government should spend more to stimulate a bad economy, this is basic economics

Press Statement
13th November 2020

The State Government over-spent in 2018 and 2019, thus reducing the State’s reserves from RM30.04 billion on 31.12.2017 to RM23.97 billion on 31.12.2019. During Abang Jo’s 2 years in office as Chief Minister, the State’s reserve has depleted by RM6.07 billion.

Despite what was said by Douglas Uggah in the Sarawak DUN sitting about the Budget surplus for 2018, the 2019 Auditor-General Report stated that the actual expenditure of the State exceeded its revenue for both 2018 and 2019. The depletion in our reserves from 2017 to 2019 is a proof of deficit. The following is an extract of the 2019 Auditor General’s Report in respect of the actual revenue and expenditure of the Sarawak State Government for the 2 years of 2018 and 2019:

Such over-spending happened in 2018 and 2019 when there was no Covid-19 pandemic and no economic recession.

When it came to 2020, the Covid-19 pandemic struck and in the second half of 2020, we will be expecting an economic recession. The negative impact of the recession will definitely carry forward to 2021.

As such, in anticipation of the likely adverse economic environment in 2021, the Government must spend more in 2021 to help stimulate the economy. Not plan for a surplus budget and restrain spending for year 2021. Spending to stimulate the state’s economy is one of the fundamental roles of a Government.

It doesn’t make sense for the GPS Government to run a deficit budget when there is economic growth (2018 and 2019), but operate a surplus budget when the economy is in recession instead (2020 and 2021). This goes against fundamental economic principles.

It is a fundamental economic principle that when there is economic growth and the government runs on a deficit budget, it runs the risk of high inflation. On the contrary, when there is negative economic growth (recession) and government runs on a surplus budget, it will worsen the recession.

Therefore, my call for the Sarawak State Government to spend more in 2021 is based on long-established economic theory and principles, i.e. “Government must spend more when the economy is bad”. There is nothing confusing about my call to spend more in light of the economic recession unless Abang Jo doesn’t understanding this basic fundamental economic principle.

Chong Chieng Jen
DAP Sarawak Chairman
MP for Stampin

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