The release of the country's first pre-budget statement as a prelude to Budget 2022 provides an opportunity for greater transparency, accountability and stakeholder engagement in the formulation of fiscal and macro-economic policies.
We would like to urge the government to take a step further and call for the establishment of an independent fiscal body (IFB).
Our suggestion takes its cue from Professor Dr Geoffrey Williams of the Malaysia University of Science and Technology (MUST), who called for an IFB to analyse public finances.
Williams also said, the Fiscal Policy and Debt Management Office (FPDMO) of the Finance Ministry "... did not cover the wide implications and alternative interpretations of budget and debt issues".
The FPDMO was modelled after a similar office in the United Kingdom. When the UK suffered a financial meltdown and credit crunch following Northern Rock's insolvency, and the government's action to partially nationalise it together with Royal Bank of Scotland, Lloyds, HBOS and TSB, the DMO has also been, in effect, "indirectly" coordinating the issuance and sale of gilts (British government bonds) with the Bank of England under quantitative easing (QE) ever since.
On the other hand, the UK's Office for Budget Responsibility was established by the David Cameron government after the Conservatives won the 2010 general election. It was meant to provide independent and neutral justification for the "expansionary fiscal contraction" policy under then chancellor George Osborne.
That is to allow for monetary policy to take the lead with near zero interest rates coupled with QE. The key is timely and accurate economic and fiscal forecasting.
The IFB would also conduct pre- and post-budgetary analyses, risk assessment and horizon scanning, and scenario management (e.g., stress tests), as an independent evaluator of the performance targets set by the government.
The IFB can also complement and supplement the role of the Dewan Rakyat's Public Accounts Committee (PAC), by providing independent and professional and expert advice and consultancy. It is proposed that the IFB reports to Parliament on a quarterly basis.
The appointment of non-partisan experts from the finance, accounting, economics and public policy sectors in the IFB allows it to fill potential gaps left by the FPDMO.
The IFB can and should look into the reports of the auditor general, accountant general, FPDMO, and statements from ministries.
Moreover, the IFB can boost the PAC's capability by asking the right questions, effectively scrutinise items under consideration and hold the government of the day to account on allocation and expenditure.
Indeed, the IFB would enhance the formulation and implementation of our fiscal policy — minimise leaks and waste, and ensure cash aid is delivered to recipients efficiently, effectively and in a timely manner.
In addition, reports from IFB would benefit what should in future be a Parliamentary Special Select Committee on the Budget, alongside the pre-existing Special Select Committee on Finance and Economy.
The case for an IFB is supported in a research paper titled The Success Factors of the Public Accounts Committee (PAC) in Malaysia: The Public Perspective (IPN Journal of Research and Practice in Public Sector Accounting and Management, 2012) by researchers from Universiti Putra Malaysia.
Furthermore, in line with calls for transparency in governance, granular data on public accounts should be made accessible through a secure digital platform.
The IFB could be appointed as the independent body for the implementation of the necessary technology layers. As for monetary policy, some policy recommendations could include the following:
FIRST, the governor of Bank Negara Malaysia alongside members of the Monetary Policy Committee should appear before a Parliamentary Special Select Committee on Monetary Policy on, e.g. bi-annually, with proceedings open to the public and published by Parliament; and,
SECOND, quarterly reviews and impact assessment of monetary policy by a future PSSC should be undertaken.
An IFB should include the impact of fiscal policy on monetary policy and vice-versa and offer policy recommendations as to how the two can be better coordinated and synchronised.
In short, the formation of an IFB would also enable monetary policy to be subject to greater scrutiny and review.
It should be considered as part of the ongoing institutional reforms for more open, inclusive, progressive and democratic governance.
The writers are from EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research