Government Must Spend More When The Economy Is Bad

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Press Statement By Chong Chieng Jen:

The State Government has over-spent in 2018 and 2019, thus reducing the State’s reserves from RM30.04 billion in 31/12/2017 to RM23.97 billion on 31/12/2019. In 2 years of Abang Jo’s office as the Chief Minister, the State’s reserve has depleted by RM6.07 billion.

Despite what was said by Douglas Uggah in Sarawak DUN about the Budget surplus for 2018, it was reported by the 2019 Auditor-General Report 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 2018 and 2019:

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

When it comes to year 2020, the Covid-19 pandemic struck and in the second half year 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 planning for a surplus budget and restraining spending for year 2021. To spend to stimulate state’s economy is one of the fundamental roles of a Government.

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

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

Therefore, my call on 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 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