The current public debt is at RM 362 billion which is 54% of GDP. The Minister said that at 12% growth of public debt per year, we will be bankrupt by 2019.
Public debt is expected to be equal to GDP in 2019 at RM 1.158 trillion. This probably means that our economy is expected to grow annually by 6 to 6.5 percent by simple calculations.
But the Government might cause ripples/shocks to the economy. Malaysia should reduce their subsidies periodically. A calculated phase out must be done.
Don't let the people decide the duration of the phase out (Look at the 2nd question above). The economists from the private and public sector should decide.
Who doesn't want to pay fuel at RM 1.80/litre for the longest duration possible as opposed to probably paying RM 2.80/litre ?
The Government should announce welfare packages targeted at the lower middle and poor income groups hand in hand with the reduction of subsidies.
Otherwise, people with lower middle income and low income will see no safety nets in place in the near term.
Proper schemes should also be announced to ensure that the middle and upper income aren't badly affected either but the core benefits should go to lower middle and the low income groups.
One thing is for sure. Individual cost of living will rise. Individuals in the low income group won't have much money left to spend or invest in other areas after consuming necessities and utilities.
It is indeed a painful path that we need to take if we want to transform into a high income + high cost economy.
Anyway, I wonder what will the Government say if the official statistics show that the people voted against the Subsidy Rationalisation Plan.
The last time we were told to absorb higher costs individually for fuel, the Government promised us better public transportation. We were hoodwinked by the former administration.
It is said that the Subsidy Rationalisation Plan will save us RM 103 billion over the next 5 years.
Unfortunately, it will only be a saving of RM 20.6 billion a year on average. Compare it to a 12 % growth of public debt from current level which comes to about RM 43.44 billion. Saving RM 103 billion over the next 5 years won't help us for long.
So, after cutting costs in the listed categories (and hopefully other sectors also), the Government must really look into sectors that can generate more revenue and also improve the ease of doing business in Malaysia.
Communications and transportation sector please, Sir !