The 2022 Budget comes as the nation emerges from the ravages of Covid-19, warranting the government to spend on wage subsidies, aid for stricken small- and medium-scale enterprises (SMEs), and tax breaks for businesses.
Expenditure for social safety nets tears at the seams of public finances. Ultra-low interest rates and the increase in the debt ceiling to 65 per cent of the gross domestic product have made extra public sector spending possible.
Fractured supply chains have affected Malaysia's export capability and competitiveness.
With the United Nations Climate Change Conference in progress, nations are under increasing pressure to meet their bold commitments to reduce global warming.
How does the 2022 Budget fare in economic recovery, alleviating income disparities and advancing environmental protection?
It signals that the country is not yet ready to tighten its fiscal belt. As such, the budget is an expansionary one.
At over RM332 billion, it is the highest in the annals of Malay-sia's budgeting.
The budget extends the largesse poured out during the pandemic. It makes clear that the government wants to nurture the green shoots of economic recovery. Such lavish spending also signifies that the policy of low interest rates will take time to deliver a positive impact on economic regeneration.
Reflecting the government's commitment to human development, the budget offers generous allocations for hand-outs (RM31 billion), education (RM67 billion) and health services (RM38 billion).
Combined, they account for 40 per cent of the budget, and such a huge allocation ensures people's livelihoods are protected and that they have the spending power to spur the economy.
Comprising 11 per cent of the budget, the healthcare allocation should enable Malaysia to continue having one of the best healthcare systems in the world.
The government also wants to instil confidence in investors that Malaysia offers a resilient ecosystem, hence the hefty spending on physical and digital infrastructure.
As it turns a corner, the economy grows hungry for talent. Accordingly, the budget continues the emphasis on job creation (with a RM2 billion allocation) and reskilling and upskilling through technical and vocational training.
As the nation's competitiveness depends on the efficiency of the public service, the budget provides for the continued motivation of public servants.
However, further efficiency requires more investments in technology. Such investments also contain the size of the public service.
As Covid-19 graduates to the endemic stage, the hand-outs should gradually be tamped down. The focus should increasingly be on building capacity in the economy to face the competition in the global marketplace.
As such, the RM12.5 billion allocated to revive SMEs — the backbone of the economy — through the adoption of Industry 4.0 technologies is a step in the right direction.
For long-term economic growth and social welfare, the government should fight global warming. The budget offers tax relief for electric vehicles and their charging stations, and for the adoption of green technologies.
However, the relief is not as ambitious as Malaysia's commitment to reduce the intensity of its carbon emission by 45 per cent compared with 2005 levels by 2030 and become carbon-neutral by 2050.
The 2020 Budget also allocates close to half a billion ringgit for research and innovation. That is the only way we can differentiate our economy and join the league of advanced economies that flourish on the backs of innovation and creativity.
Higher borrowing to meet the expected six per cent budget deficit is inevitable. We must not shy away from borrowing, but, we need to be prudent on how we use it knowing that RM43 billion, or nearly one-fifth of the operating expenditure, will go to debt servicing.
We also should be mindful of the auditor general's warning that borrowing money to pay off past debts is not sustainable.
All this will require the government to traverse a precarious path between stimulus today and prudence in the future.
The 2022 Budget rewards public servants. Now, they will have to rise to implement it without waste and mismanagement.
The writer is AIMST University vice-chancellor