MACROECONOMICSMACROECONOMICS

ROLE OF GOVERNMENTROLE OF GOVERNMENT

ECONOMIC FUNCTION OF GOVERNMENTECONOMIC FUNCTION OF GOVERNMENT

The government plays an important role in ensuring the stability and economic growth of The government plays an important role in ensuring the stability and economic growth of a country. a country.

The economic functions of the government are many and varied. Some of the important The economic functions of the government are many and varied. Some of the important functions of governments are as follows:functions of governments are as follows:

1. Governments will adjust the allocation of resources to alter the composition of the 1. Governments will adjust the allocation of resources to alter the composition of the domestic output.domestic output.

2. Governments will assist the private sector to ensure economic stabilization by 2. Governments will assist the private sector to ensure economic stabilization by controlling unemployment and inflation, which are caused by business fluctuations.controlling unemployment and inflation, which are caused by business fluctuations.

3. Governments will create a business environment, which 3. Governments will create a business environment, which encourages competition among producers. This can encourages competition among producers. This can increase efficiency in the utilization of resources and increase efficiency in the utilization of resources and produce better quality products. Governments will also produce better quality products. Governments will also control the power of firms enjoying a monopoly.control the power of firms enjoying a monopoly.

4. Governments will redistribute income and wealth among 4. Governments will redistribute income and wealth among the population. Governments will control the income the population. Governments will control the income disparity between the rich and poor through taxation and disparity between the rich and poor through taxation and transfer paymentstransfer payments

5. Governments will create a business environment, which 5. Governments will create a business environment, which encourages competition among producers. This can encourages competition among producers. This can increase efficiency in the utilization of resources and increase efficiency in the utilization of resources and produce better quality products. Governments will also produce better quality products. Governments will also control the power of firms enjoying a monopoly.control the power of firms enjoying a monopoly.

6. Governments will redistribute income and wealth among 6. Governments will redistribute income and wealth among the population. Governments will control the income the population. Governments will control the income disparity between the rich and poor through taxation and disparity between the rich and poor through taxation and transfer paymentstransfer payments

7. Governments will provide a legal framework and a 7. Governments will provide a legal framework and a social framework for the effective operation of an social framework for the effective operation of an economy. A legal framework includes the legal status of economy. A legal framework includes the legal status of business enterprises, private ownership and others.business enterprises, private ownership and others.

NATIONAL BUDGETNATIONAL BUDGET

A national budget is a document containing a preliminary approval plan A national budget is a document containing a preliminary approval plan of public revenue and expenditure in a year.of public revenue and expenditure in a year.

Belanjawan negara adalah dokumen yang mengandungi pelan kelulusan Belanjawan negara adalah dokumen yang mengandungi pelan kelulusan awal daripada hasil awam dan perbelanjaan dalam setahun.awal daripada hasil awam dan perbelanjaan dalam setahun.

BELANJAWAN NEGARABELANJAWAN NEGARA

Belanjawan adalah “satu penyataan Anggaran Hasil dan Perbelanjaan Belanjawan adalah “satu penyataan Anggaran Hasil dan Perbelanjaan bagi tahun hadapan yang digunakan sebagai alat perancangan dan bagi tahun hadapan yang digunakan sebagai alat perancangan dan pengurusan sumber ekonomi negara untuk memenuhi keperluan rakyat”pengurusan sumber ekonomi negara untuk memenuhi keperluan rakyat”

TYPES OF BUDGETTYPES OF BUDGET

There are three types of budget:There are three types of budget:

Balanced BudgetBalanced Budget

Surplus BudgetSurplus Budget

Deficit BudgetDeficit Budget

1. Balanced Budget1. Balanced BudgetA balanced budget occurs when the government’s total A balanced budget occurs when the government’s total expenditure is equal to its total revenue.expenditure is equal to its total revenue.

2.2. Surplus BudgetSurplus BudgetA surplus budget occurs when the government’s total A surplus budget occurs when the government’s total revenue is more than its total expenditure. A government revenue is more than its total expenditure. A government with a surplus budget can pay up its debts or earn interest with a surplus budget can pay up its debts or earn interest on funds.on funds.

3. 3. Deficit BudgetDeficit BudgetA deficit budget occurs when the government’s total A deficit budget occurs when the government’s total expenditure is more than its total revenue. expenditure is more than its total revenue.

A government with a deficit budget must either borrow A government with a deficit budget must either borrow from external or internal sources, or use its reserves.from external or internal sources, or use its reserves.

GOVERNMENT REVENUEGOVERNMENT REVENUE

Sources of RevenueSources of Revenue

1. Tax Revenue1. Tax RevenueTax is compulsory contribution by an individual or a firm to the government to be used in the Tax is compulsory contribution by an individual or a firm to the government to be used in the common interest of all.common interest of all.Tax is contribution to the revenue of the government so that the government can provide the Tax is contribution to the revenue of the government so that the government can provide the necessary administrative services to govern the country.necessary administrative services to govern the country.

..

Direct tax revenue includes individual income tax, Direct tax revenue includes individual income tax, companies’ income tax, petroleum income tax, stamp companies’ income tax, petroleum income tax, stamp duties, real property gains tax and other income taxes.duties, real property gains tax and other income taxes.

Indirect tax includes import duties, excise duties, sales Indirect tax includes import duties, excise duties, sales tax, service tax, gaming tax, etc.tax, service tax, gaming tax, etc.

Tax Revenue (Hasil Cukai)Tax Revenue (Hasil Cukai)Pendapatan kerajaan yang diperoleh daripada kutipan Pendapatan kerajaan yang diperoleh daripada kutipan cukai langsung (seperti cukai pendapatan persendirian cukai langsung (seperti cukai pendapatan persendirian dan cukai korporat) dan cukai tak langsung (seperti cukai dan cukai korporat) dan cukai tak langsung (seperti cukai eksais dan cukai jualan).eksais dan cukai jualan).

2. Non-tax Revenue2. Non-tax RevenueNon-tax revenues are revenues which arise from other Non-tax revenues are revenues which arise from other sources besides tax. Non-tax revenue includes revenue sources besides tax. Non-tax revenue includes revenue from licenses and permits, petroleum royalty, interest and from licenses and permits, petroleum royalty, interest and returns on investment, fees and penalties.returns on investment, fees and penalties.

Pendapatan kerajaan yang diperoleh daripada bayaran Pendapatan kerajaan yang diperoleh daripada bayaran perkhidmatan yang diberikan oleh kerajaan seperti setem, perkhidmatan yang diberikan oleh kerajaan seperti setem, bayaran denda yang ditentukan oleh undang-undang, dan bayaran denda yang ditentukan oleh undang-undang, dan lesen.lesen.

3. Non-tax Receipts3. Non-tax ReceiptsNon-revenue receipts include refunds of expenditure Non-revenue receipts include refunds of expenditure and receipts from government agencies.and receipts from government agencies.

TAXATIONTAXATION

Taxes are the most important source of government revenue.Taxes are the most important source of government revenue.

Objectives of TaxationObjectives of TaxationIncomeIncome

Taxes are the most important source of income for the government and Taxes are the most important source of income for the government and the government uses the taxes collected to finance its expenditure.the government uses the taxes collected to finance its expenditure.

Equitable distribution of incomeEquitable distribution of income

Taxation reduces the inequality of income between the rich and Taxation reduces the inequality of income between the rich and the poor. Examples of this type of taxation are income tax and the poor. Examples of this type of taxation are income tax and property tax.property tax.

Reduction of harmful consumptionReduction of harmful consumption

Taxation is imposed on goods such as cigarettes and alcohol in Taxation is imposed on goods such as cigarettes and alcohol in order to restrain people from consuming these. Higher taxes order to restrain people from consuming these. Higher taxes are imposed on the goods to make them expensive.are imposed on the goods to make them expensive.

Regulation of Foreign TradeRegulation of Foreign Trade

Taxes are levied on imported goods to protect local Taxes are levied on imported goods to protect local industries or infant industries.industries or infant industries.

Conservation of resourcesConservation of resources

Taxes are also imposed on scarce resources such as coal Taxes are also imposed on scarce resources such as coal and petroleum so as to increase their price and and petroleum so as to increase their price and discourage exports.discourage exports.

TYPES OF TAXESTYPES OF TAXES

Taxes are divided into two types:Taxes are divided into two types:

1. Direct taxes1. Direct taxes

2. Indirect taxes2. Indirect taxes

DIRECT TAXESDIRECT TAXES

Direct taxes are taxes that are directly imposed on individuals or bodies Direct taxes are taxes that are directly imposed on individuals or bodies that are eligible to be taxed. that are eligible to be taxed.

This tax burden cannot be transferred to other people. This tax burden cannot be transferred to other people.

Examples of direct taxes are individual income tax, corporate income tax, Examples of direct taxes are individual income tax, corporate income tax, property tax and road tax.property tax and road tax.

INDIRECT TAXESINDIRECT TAXES

Indirect taxes are taxes that are indirectly imposed on parties that are Indirect taxes are taxes that are indirectly imposed on parties that are required to pay taxes. required to pay taxes.

This tax burden can be transferred to other parties. This tax burden can be transferred to other parties.

For example, producers can transfer taxes imposed by the government For example, producers can transfer taxes imposed by the government to consumers by including the value of the taxes in the price of goods to consumers by including the value of the taxes in the price of goods sold. This tax is known as sales tax. Another examples of indirect tax is sold. This tax is known as sales tax. Another examples of indirect tax is service tax, eksais tax, import and export tax.service tax, eksais tax, import and export tax.

TYPES OF TAX STRUCTURETYPES OF TAX STRUCTURE

Taxes are divided into three structures based on the rate of taxation.Taxes are divided into three structures based on the rate of taxation.

a)a)Proportional TaxProportional Tax

b)b)Progressive TaxProgressive Tax

c)c)Regressive TaxRegressive Tax

PROPORTIONAL TAXPROPORTIONAL TAXA proportional tax is a tax which is imposed at the same A proportional tax is a tax which is imposed at the same

rate for all income levels. The tax rate remains constant rate for all income levels. The tax rate remains constant regardless of whether income increases or decreases.regardless of whether income increases or decreases.

Cukai berkadar ialah cukai yang dikenakan pada kadar Cukai berkadar ialah cukai yang dikenakan pada kadar yang sama bagi semua peringkat pendapatan. Kadar yang sama bagi semua peringkat pendapatan. Kadar cukai masih tetap tidak kira sama ada peningkatan atau cukai masih tetap tidak kira sama ada peningkatan atau penurunan pendapatan.penurunan pendapatan.

Example: Corporate Income TaxExample: Corporate Income Tax

PROPORTIONAL TAXPROPORTIONAL TAX

Income 500 1000 1500 2000 2500Total taxes

25 50 75 100 125

Tax rate 5% 5% 5% 5% 5%

PROGRESSIVE TAXPROGRESSIVE TAX

A progressive tax is a tax rate which goes on increasing with income. A progressive tax is a tax rate which goes on increasing with income. The higher the income, the higher the percentage of tax.The higher the income, the higher the percentage of tax.

Example: Individual income taxExample: Individual income tax

PROGRESSIVE TAXPROGRESSIVE TAX

Income 500 1000 1500 2000 2500Total taxes

25 80 150 240 375

Tax rate 5% 8% 10% 12% 15%

REGRESSIVE TAXREGRESSIVE TAX

A regressive tax is a tax which falls with an increase income. A A regressive tax is a tax which falls with an increase income. A regressive tax is the opposite of progressive tax. The higher the income, regressive tax is the opposite of progressive tax. The higher the income, the lower the percentage of tax.the lower the percentage of tax.

Cukai regresif adalah cukai yang jatuh dengan pendapatan meningkat. Cukai regresif adalah cukai yang jatuh dengan pendapatan meningkat. Cukai regresif adalah bertentangan dengan cukai progresif. Apabila Cukai regresif adalah bertentangan dengan cukai progresif. Apabila pendapatan lebih tinggi, lebih rendah peratusan cukai.pendapatan lebih tinggi, lebih rendah peratusan cukai.

REGRESSIVE TAXREGRESSIVE TAX

Income 500 1000 1500 2000 2500Total taxes

50 80 90 80 50

Tax rate 10% 8% 6% 4% 2%

GOVERNMENT EXPENDITUREGOVERNMENT EXPENDITURE

There are two categories of government expenditure:There are two categories of government expenditure:

Operating expenditureOperating expenditure

Development expenditureDevelopment expenditure

GOVERNMENT OPERATING EXPENDITUREGOVERNMENT OPERATING EXPENDITURE

Operating expenditure is the government expenditure allocated to cover Operating expenditure is the government expenditure allocated to cover the expenses of operating and administering government departments. the expenses of operating and administering government departments.

Perbelanjaan operasi adalah perbelanjaan kerajaan yang diperuntukkan Perbelanjaan operasi adalah perbelanjaan kerajaan yang diperuntukkan untuk menampung perbelanjaan mengurus dan mentadbir jabatan untuk menampung perbelanjaan mengurus dan mentadbir jabatan kerajaankerajaan..

Operating expenditure consists of emoluments, pensions Operating expenditure consists of emoluments, pensions and gratuities, debts, service charges, supplies and and gratuities, debts, service charges, supplies and services, subsidies, asset acquisitions, grants and services, subsidies, asset acquisitions, grants and transfers and other types of expenditure.transfers and other types of expenditure.

Perbelanjaan operasi terdiri daripada emolumen, pencen Perbelanjaan operasi terdiri daripada emolumen, pencen dan ganjaran, hutang, bayaran perkhidmatan, bekalan dan ganjaran, hutang, bayaran perkhidmatan, bekalan dan perkhidmatan, subsidi, pemerolehan aset, pemberian dan perkhidmatan, subsidi, pemerolehan aset, pemberian dan bayaran pindahan dan lain-lain jenis perbelanjaan.dan bayaran pindahan dan lain-lain jenis perbelanjaan.

GOVERNMENT DEVELOPMENT EXPENDITUREGOVERNMENT DEVELOPMENT EXPENDITURE

Development expenditure is government expenditure for investment Development expenditure is government expenditure for investment purposes to improve facilities in the basic physical infrastructure. purposes to improve facilities in the basic physical infrastructure.

Perbelanjaan pembangunan merupakan perbelanjaan kerajaan untuk Perbelanjaan pembangunan merupakan perbelanjaan kerajaan untuk tujuan pelaburan untuk menambah baik kemudahan infrastruktur fizikal tujuan pelaburan untuk menambah baik kemudahan infrastruktur fizikal asas. asas.

Government development expenditure is focused on Government development expenditure is focused on development project that can boost economic growth. development project that can boost economic growth.

Perbelanjaan pembangunan Kerajaan memberi tumpuan Perbelanjaan pembangunan Kerajaan memberi tumpuan kepada projek pembangunan yang boleh merangsang kepada projek pembangunan yang boleh merangsang pertumbuhan ekonomi.pertumbuhan ekonomi.

Development expenditure consists of the following:Development expenditure consists of the following:

Defence and SecurityDefence and SecurityEconomic ServicesEconomic Services

Economic services comprise agriculture and rural development, trade Economic services comprise agriculture and rural development, trade and industry, transport, public utilities and other services, including and industry, transport, public utilities and other services, including communications, feasibility studies and mineral resources.communications, feasibility studies and mineral resources.

Perkhidmatan ekonomi terdiri daripada pertanian dan pembangunan Perkhidmatan ekonomi terdiri daripada pertanian dan pembangunan luar bandar, perdagangan dan industri, pengangkutan, kemudahan luar bandar, perdagangan dan industri, pengangkutan, kemudahan awam dan perkhidmatan lain, termasuk komunikasi, kajian awam dan perkhidmatan lain, termasuk komunikasi, kajian kemungkinan dan sumber mineral.kemungkinan dan sumber mineral.

Social ServicesSocial Services

Social services comprise education, health, housing, and Social services comprise education, health, housing, and social and community services.social and community services.

General AdministrationGeneral Administration

General Administration includes the Department of Public General Administration includes the Department of Public Services (JPA), Inland Revenue Department (LHDN), Services (JPA), Inland Revenue Department (LHDN), Royal Customs and Excise, Department of Statistics, and Royal Customs and Excise, Department of Statistics, and the Ministry of Foreign Affairs.the Ministry of Foreign Affairs.

PUBLIC DEBTPUBLIC DEBT

Public debt means the debt which a government owes to its subjects or Public debt means the debt which a government owes to its subjects or to the nation of other countries. If the government revenue from taxation to the nation of other countries. If the government revenue from taxation and non-tax revenue are insufficient to meet the rising cost of and non-tax revenue are insufficient to meet the rising cost of expenditure, the government has to borrow from various sources. expenditure, the government has to borrow from various sources.

Public debt is also known as public borrowing.Public debt is also known as public borrowing.

SOURCES OF PUBLIC DEBTSOURCES OF PUBLIC DEBT

Public borrowing comes from two different sources, which can either be internal Public borrowing comes from two different sources, which can either be internal or external.or external.

Internal SourcesInternal Sources

a)a)Borrowing from citizens through the sale of securities, bonds and saving Borrowing from citizens through the sale of securities, bonds and saving certificates to citizens.certificates to citizens.

Meminjam daripada rakyat melalui penjualan Meminjam daripada rakyat melalui penjualan sekuriti, bon dan sekuriti, bon dan menyimpan sijil kepada rakyat.menyimpan sijil kepada rakyat.

b) Borrowing from financial institutions such as insurance b) Borrowing from financial institutions such as insurance companies by investing their resources in the purchase of companies by investing their resources in the purchase of government securities.government securities.

Meminjam daripada institusi kewangan seperti syarikat-Meminjam daripada institusi kewangan seperti syarikat-syarikat insurans dengan melabur sumber-sumber mereka syarikat insurans dengan melabur sumber-sumber mereka dalam pembelian sekuriti kerajaan.dalam pembelian sekuriti kerajaan.

c) Loans from the Central Bank where the central bank c) Loans from the Central Bank where the central bank purchases government securities, bonds and debentures purchases government securities, bonds and debentures from the government.from the government.

Pinjaman daripada Bank Negara di mana bank pusat Pinjaman daripada Bank Negara di mana bank pusat membeli sekuriti kerajaan, bon dan debentur daripada membeli sekuriti kerajaan, bon dan debentur daripada kerajaan.kerajaan.

d) Loans from commercial banks where the commercial d) Loans from commercial banks where the commercial banks invest a part of their deposits in government bonds banks invest a part of their deposits in government bonds and securities to fulfil liquidity requirements.and securities to fulfil liquidity requirements.

Pinjaman daripada bank-bank perdagangan di mana bank Pinjaman daripada bank-bank perdagangan di mana bank perdagangan melabur sebahagian daripada simpanan perdagangan melabur sebahagian daripada simpanan mereka dalam bon dan sekuriti kerajaan untuk memenuhi mereka dalam bon dan sekuriti kerajaan untuk memenuhi keperluan kecairan.keperluan kecairan.

EXTERNAL SOURCESEXTERNAL SOURCES

International money market such as some foreign exchange bank in International money market such as some foreign exchange bank in Paris, London and New York which have big deposits to lend any Paris, London and New York which have big deposits to lend any government requesting loans.government requesting loans.

Pasaran wang antarabangsa seperti beberapa bank pertukaran asing di Pasaran wang antarabangsa seperti beberapa bank pertukaran asing di Paris, London dan New York yang mempunyai deposit yang besar untuk Paris, London dan New York yang mempunyai deposit yang besar untuk memberi pinjaman mana-mana kerajaan yang meminta pinjaman.memberi pinjaman mana-mana kerajaan yang meminta pinjaman.

Currency loans from foreign governments such as the Currency loans from foreign governments such as the USA, UK, Germany and Japan for the supply of needed USA, UK, Germany and Japan for the supply of needed goods. The loan is documented in a contract.goods. The loan is documented in a contract.

Pinjaman mata wang daripada kerajaan asing seperti Amerika Pinjaman mata wang daripada kerajaan asing seperti Amerika Syarikat, United Kingdom, Jerman dan Jepun untuk Syarikat, United Kingdom, Jerman dan Jepun untuk membekalkan barang-barang yang diperlukan. Pinjaman ini membekalkan barang-barang yang diperlukan. Pinjaman ini akan didokumenkan dalam kontrak.akan didokumenkan dalam kontrak.

Loans from International Financial Institutions such as Loans from International Financial Institutions such as International Monetary Fund (IMF) which gives loans to International Monetary Fund (IMF) which gives loans to its members on a short-term basis and the World Bank its members on a short-term basis and the World Bank which gives long-term loans for economic development which gives long-term loans for economic development on a reasonable rate of interest.on a reasonable rate of interest.

Pinjaman dari Institusi Kewangan Antarabangsa seperti Pinjaman dari Institusi Kewangan Antarabangsa seperti Tabung Kewangan Antarabangsa (IMF) yang memberi Tabung Kewangan Antarabangsa (IMF) yang memberi pinjaman kepada ahli-ahlinya secara jangka pendek dan Bank pinjaman kepada ahli-ahlinya secara jangka pendek dan Bank Dunia yang memberikan pinjaman jangka panjang untuk Dunia yang memberikan pinjaman jangka panjang untuk pembangunan ekonomi pada kadar faedah yang munasabah.pembangunan ekonomi pada kadar faedah yang munasabah.

ADVANTAGES OF PUBLIC DEBT (NATIONAL DEBT)ADVANTAGES OF PUBLIC DEBT (NATIONAL DEBT)

1.1. Economic growthEconomic growth The national debt exists when the government takes loans to finance The national debt exists when the government takes loans to finance

economic development projects. Implementation of development projects economic development projects. Implementation of development projects generate economic growth and create jobs in order to overcome the problem generate economic growth and create jobs in order to overcome the problem of unemployment in the country.of unemployment in the country.

Hutang negara wujud apabila kerajaan mengambil pinjaman untuk membiayai Hutang negara wujud apabila kerajaan mengambil pinjaman untuk membiayai projek-projek pembangunan ekonomi. Pelaksanaan projek-projek pembangunan projek-projek pembangunan ekonomi. Pelaksanaan projek-projek pembangunan menjana pertumbuhan ekonomi dan mewujudkan peluang pekerjaan untuk menjana pertumbuhan ekonomi dan mewujudkan peluang pekerjaan untuk mengatasi masalah pengangguran di negara ini.mengatasi masalah pengangguran di negara ini.

2. 2. Economic recovery from recessionEconomic recovery from recessionBudget deficit is used to stimulate economic activity when the Budget deficit is used to stimulate economic activity when the economy is in recession. Government involvement in economic economy is in recession. Government involvement in economic activities such as construction of infrastructure will increase activities such as construction of infrastructure will increase aggregate spending in the economy and help lift the economy aggregate spending in the economy and help lift the economy out of recession. out of recession. Belanjawan defisit digunakan untuk merangsang aktiviti ekonomi Belanjawan defisit digunakan untuk merangsang aktiviti ekonomi apabila ekonomi berada dalam kemelesetan. Penglibatan Kerajaan apabila ekonomi berada dalam kemelesetan. Penglibatan Kerajaan dalam aktiviti ekonomi seperti pembinaan infrastruktur akan dalam aktiviti ekonomi seperti pembinaan infrastruktur akan meningkatkan perbelanjaan agregat dalam ekonomi dan membantu meningkatkan perbelanjaan agregat dalam ekonomi dan membantu meningkatkan ekonomi daripada kemelesetan.meningkatkan ekonomi daripada kemelesetan.

3. 3. Channelling domestic savings to productive activities / Channelling domestic savings to productive activities / Menyalurkan tabungan dalam negeri untuk aktiviti produktifMenyalurkan tabungan dalam negeri untuk aktiviti produktifSales of treasury bills and government securities are a safe tool for Sales of treasury bills and government securities are a safe tool for community savings and higher returns to the people, especially when community savings and higher returns to the people, especially when interest rates in banks are very low. Funds raised by the government interest rates in banks are very low. Funds raised by the government can be used to finance development expenditure. can be used to finance development expenditure.

Jualan bil perbendaharaan dan sekuriti kerajaan adalah alat yang Jualan bil perbendaharaan dan sekuriti kerajaan adalah alat yang selamat untuk simpanan masyarakat dan pulangan yang lebih tinggi selamat untuk simpanan masyarakat dan pulangan yang lebih tinggi kepada rakyat, terutamanya apabila kadar faedah di bank-bank yang kepada rakyat, terutamanya apabila kadar faedah di bank-bank yang sangat rendah. Dana yang diperoleh oleh kerajaan boleh digunakan untuk sangat rendah. Dana yang diperoleh oleh kerajaan boleh digunakan untuk membiayai perbelanjaan pembangunan.membiayai perbelanjaan pembangunan.

DISADVANTAGES OF PUBLIC DEBT (NATIONAL DEBT)DISADVANTAGES OF PUBLIC DEBT (NATIONAL DEBT)

1.1. Higher taxesHigher taxes Future generations will bear the burden of national debt in the form of Future generations will bear the burden of national debt in the form of

higher taxes to enable the government to collect revenue for the higher taxes to enable the government to collect revenue for the payment of the outstanding loan and interest on debt. payment of the outstanding loan and interest on debt.

Generasi akan datang akan menanggung beban hutang negara dalam bentuk Generasi akan datang akan menanggung beban hutang negara dalam bentuk cukai yang lebih tinggi untuk membolehkan kerajaan untuk memungut hasil cukai yang lebih tinggi untuk membolehkan kerajaan untuk memungut hasil bagi pembayaran pinjaman yang tertunggak dan faedah ke atas hutang.bagi pembayaran pinjaman yang tertunggak dan faedah ke atas hutang.

2. 2. Unequal distribution of incomeUnequal distribution of incomePayment of interest on the sale of government securities Payment of interest on the sale of government securities to the public will benefit only those who are able to buy to the public will benefit only those who are able to buy these bonds when all segments of society have to bear the these bonds when all segments of society have to bear the tax burden to pay principal and interest on debt. tax burden to pay principal and interest on debt. Bayaran faedah ke atas penjualan sekuriti kerajaan kepada Bayaran faedah ke atas penjualan sekuriti kerajaan kepada orang ramai akan memberi manfaat kepada hanya mereka orang ramai akan memberi manfaat kepada hanya mereka yang mampu untuk membeli bon ini apabila semua lapisan yang mampu untuk membeli bon ini apabila semua lapisan masyarakat terpaksa menanggung beban cukai untuk masyarakat terpaksa menanggung beban cukai untuk membayar pokok dan faedah ke atas hutang.membayar pokok dan faedah ke atas hutang.

3. 3. Negative impact of currency outflow during debt Negative impact of currency outflow during debt repayment / repayment / Kesan negatif daripada aliran keluar mata Kesan negatif daripada aliran keluar mata wang dalam pembayaran balik hutangwang dalam pembayaran balik hutangPayment of interest and principal repayments of external debt Payment of interest and principal repayments of external debt lead to money flowing out of the country and foreign exchange lead to money flowing out of the country and foreign exchange reserves will be reduced. If foreign exchange reserves position reserves will be reduced. If foreign exchange reserves position is not sound, it can affect the exchange rate stability. is not sound, it can affect the exchange rate stability. Bayaran faedah dan bayaran balik hutang luar negeri menyebabkan Bayaran faedah dan bayaran balik hutang luar negeri menyebabkan wang mengalir keluar dari negara dan rizab pertukaran asing akan wang mengalir keluar dari negara dan rizab pertukaran asing akan berkurangan. Jika kedudukan rizab pertukaran asing tidak adalah berkurangan. Jika kedudukan rizab pertukaran asing tidak adalah kukuh, ia boleh menjejaskan kestabilan kadar pertukaran.kukuh, ia boleh menjejaskan kestabilan kadar pertukaran.

BENEFITS OF DOMESTIC LOANSBENEFITS OF DOMESTIC LOANS

1. Easier to obtain loans1. Easier to obtain loansIt is easier for the government to borrow from domestic sources with the sale of government It is easier for the government to borrow from domestic sources with the sale of government securities and government treasury bills to financial institutions in the country such as EPF securities and government treasury bills to financial institutions in the country such as EPF and insurance companies. Loans from abroad involve the payment of higher interest rates. and insurance companies. Loans from abroad involve the payment of higher interest rates. Loans in the country can overcome the problem of excess liquidity in the country.Loans in the country can overcome the problem of excess liquidity in the country.

Adalah lebih mudah bagi kerajaan untuk meminjam daripada sumber dalam negeri dengan Adalah lebih mudah bagi kerajaan untuk meminjam daripada sumber dalam negeri dengan penjualan sekuriti kerajaan dan bil perbendaharaan kerajaan kepada institusi kewangan di penjualan sekuriti kerajaan dan bil perbendaharaan kerajaan kepada institusi kewangan di negara ini seperti syarikat KWSP dan insurans. Pinjaman dari luar negara melibatkan negara ini seperti syarikat KWSP dan insurans. Pinjaman dari luar negara melibatkan pembayaran kadar faedah yang lebih tinggi. Pinjaman di negara ini boleh mengatasi masalah pembayaran kadar faedah yang lebih tinggi. Pinjaman di negara ini boleh mengatasi masalah lebihan mudah tunai di negara ini.lebihan mudah tunai di negara ini.

2. Flow of money out of the country does not occur / 2. Flow of money out of the country does not occur / Aliran wang keluar dari negara ini tidak berlakuAliran wang keluar dari negara ini tidak berlakuLoans in the country do not involve an outflow of money Loans in the country do not involve an outflow of money from the country for payment of loan interest and principal.from the country for payment of loan interest and principal.

Pinjaman di negara ini tidak melibatkan aliran keluar wang Pinjaman di negara ini tidak melibatkan aliran keluar wang dari negara ini untuk membayar faedah pinjaman utama bank.dari negara ini untuk membayar faedah pinjaman utama bank.

3. Not exposed to the risk of changes in the rate of 3. Not exposed to the risk of changes in the rate of exchange / exchange / Tidak terdedah kepada risiko perubahan dalam Tidak terdedah kepada risiko perubahan dalam kadar pertukarankadar pertukaranLoans from domestic sources are not exposed to the risk of Loans from domestic sources are not exposed to the risk of exhange rate changes. If the government borrows from foreign exhange rate changes. If the government borrows from foreign sources, the increase in foreign exchange rates will cause debt sources, the increase in foreign exchange rates will cause debt to increase.to increase.Pinjaman daripada sumber dalam negeri tidak terdedah kepada Pinjaman daripada sumber dalam negeri tidak terdedah kepada risiko perubahan kadar pertukaran. Jika kerajaan meminjam dari risiko perubahan kadar pertukaran. Jika kerajaan meminjam dari sumber asing, peningkatan dalam kadar pertukaran asing akan sumber asing, peningkatan dalam kadar pertukaran asing akan menyebabkan hutang meningkat.menyebabkan hutang meningkat.

DISADVANTAGES OF DOMESTIC LOANSDISADVANTAGES OF DOMESTIC LOANS

1.1. Limited loan resourcesLimited loan resources Although the loans are easily available, the market for government Although the loans are easily available, the market for government

securities is limited. Therefore, the total loans from lending sources in securities is limited. Therefore, the total loans from lending sources in the country may not be sufficient to meet government requirements.the country may not be sufficient to meet government requirements.

Meskipun pinjaman-pinjaman mudah didapati, pasaran untuk sekuriti kerajaan Meskipun pinjaman-pinjaman mudah didapati, pasaran untuk sekuriti kerajaan adalah terhad. Oleh itu, jumlah pinjaman daripada sumber pinjaman di negara adalah terhad. Oleh itu, jumlah pinjaman daripada sumber pinjaman di negara ini mungkin tidak mencukupi untuk memenuhi keperluan kerajaan.ini mungkin tidak mencukupi untuk memenuhi keperluan kerajaan.

2. Reduces consumption and investment2. Reduces consumption and investmentGovernment competition with the private sector to acquire Government competition with the private sector to acquire resources in the country’s limited borrowing would raise interest resources in the country’s limited borrowing would raise interest rates. The increase in domestic interest rates will reduce rates. The increase in domestic interest rates will reduce consumption and investment in the private sector.consumption and investment in the private sector.

Persaingan kerajaan dengan sektor swasta untuk memperoleh Persaingan kerajaan dengan sektor swasta untuk memperoleh sumber pinjaman negara yang terhad akan menaikkan kadar faedah. sumber pinjaman negara yang terhad akan menaikkan kadar faedah. Peningkatan dalam kadar faedah dalam negeri akan mengurangkan Peningkatan dalam kadar faedah dalam negeri akan mengurangkan penggunaan dan pelaburan dalam sektor swasta.penggunaan dan pelaburan dalam sektor swasta.

3. Reduces the money supply in the economy / 3. Reduces the money supply in the economy / Mengurangkan penawaran wang dalam ekonomiMengurangkan penawaran wang dalam ekonomiSales of government securities and treasury bills of financial Sales of government securities and treasury bills of financial institutions of the government will reduce the liquidity and institutions of the government will reduce the liquidity and money supply in the economy. The decline in excess reserves money supply in the economy. The decline in excess reserves of commercial banks limit the ability of banks to create credit. of commercial banks limit the ability of banks to create credit.

Jualan sekuriti kerajaan dan bil perbendaharaan institusi kewangan Jualan sekuriti kerajaan dan bil perbendaharaan institusi kewangan kerajaan akan mengurangkan mudah tunai dan wang bekalan dalam kerajaan akan mengurangkan mudah tunai dan wang bekalan dalam ekonomi. Penurunan rizab berlebihan bank perdagangan ekonomi. Penurunan rizab berlebihan bank perdagangan mengehadkan keupayaan bank-bank untuk mewujudkan kredit.mengehadkan keupayaan bank-bank untuk mewujudkan kredit.

BENEFITS OF FOREIGN LOANSBENEFITS OF FOREIGN LOANS

1. Wider loans resources1. Wider loans resourcesThe government has a wider choice in the international financial market in the The government has a wider choice in the international financial market in the sale of government securities such as New York, London, and Tokyo. Therefore, sale of government securities such as New York, London, and Tokyo. Therefore, the total amount of loans available is greater than the loans in the country.the total amount of loans available is greater than the loans in the country.

Kerajaan mempunyai pilihan yang lebih luas dalam pasaran kewangan antarabangsa Kerajaan mempunyai pilihan yang lebih luas dalam pasaran kewangan antarabangsa dalam penjualan sekuriti kerajaan seperti New York, London dan Tokyo. Oleh itu, jumlah dalam penjualan sekuriti kerajaan seperti New York, London dan Tokyo. Oleh itu, jumlah pinjaman yang disediakan adalah lebih besar daripada pinjaman di negara inipinjaman yang disediakan adalah lebih besar daripada pinjaman di negara ini

2. Reduces competition with the private sector / 2. Reduces competition with the private sector / Mengurangkan persaingan dengan sektor swastaMengurangkan persaingan dengan sektor swastaThe government does not have to compete with the private The government does not have to compete with the private sector to get loans from states where funding sources are sector to get loans from states where funding sources are limited. Thus, the private sector has sufficient funds to finance limited. Thus, the private sector has sufficient funds to finance projects.projects.

Kerajaan tidak perlu bersaing dengan sektor swasta untuk Kerajaan tidak perlu bersaing dengan sektor swasta untuk mendapatkan pinjaman dari negara-negara di mana sumber-sumber mendapatkan pinjaman dari negara-negara di mana sumber-sumber pembiayaan adalah terhad. Oleh itu, sektor swasta mempunyai dana pembiayaan adalah terhad. Oleh itu, sektor swasta mempunyai dana yang mencukupi untuk membiayai projek-projek.yang mencukupi untuk membiayai projek-projek.

3. Capital flows to the country / 3. Capital flows to the country / Aliran modal ke Aliran modal ke negara ininegara iniLoans from foreign capital inflows lead to futher Loans from foreign capital inflows lead to futher improvement in long-term capital account position and improvement in long-term capital account position and balance of payments deficit.balance of payments deficit.

DISADVANTAGES OF FOREIGN LOANSDISADVANTAGES OF FOREIGN LOANS

1. Higher loan costs1. Higher loan costsTo attract investors to buy government securities in the international financial To attract investors to buy government securities in the international financial markets, the government must offer higher interest rates for the government markets, the government must offer higher interest rates for the government securities market. Thus, borrowing from external sources involves higher securities market. Thus, borrowing from external sources involves higher borrowing costs.borrowing costs.Untuk menarik pelabur untuk membeli sekuriti kerajaan dalam pasaran kewangan Untuk menarik pelabur untuk membeli sekuriti kerajaan dalam pasaran kewangan antarabangsa, kerajaan perlu menawarkan kadar faedah yang lebih tinggi untuk pasaran antarabangsa, kerajaan perlu menawarkan kadar faedah yang lebih tinggi untuk pasaran sekuriti kerajaan. Oleh itu, pinjaman daripada sumber-sumber luar melibatkan kos sekuriti kerajaan. Oleh itu, pinjaman daripada sumber-sumber luar melibatkan kos pinjaman yang lebih tinggi.pinjaman yang lebih tinggi.

2. Outflow of funds abroad2. Outflow of funds abroadRepayment of loans and interest causes money to flow out. Repayment of loans and interest causes money to flow out. This reduces the supply of money in the economy and reduces This reduces the supply of money in the economy and reduces national income through the fall in aggregate spending. Money national income through the fall in aggregate spending. Money flowing abroad also reduces the country’s foreign currency flowing abroad also reduces the country’s foreign currency reserves and balance of payments.reserves and balance of payments.Bayaran balik pinjaman dan faedah menyebabkan wang mengalir Bayaran balik pinjaman dan faedah menyebabkan wang mengalir keluar. Ini mengurangkan bekalan wang dalam ekonomi dan keluar. Ini mengurangkan bekalan wang dalam ekonomi dan mengurangkan pendapatan negara melalui kejatuhan dalam mengurangkan pendapatan negara melalui kejatuhan dalam perbelanjaan agregat. Wang yang mengalir ke luar negara juga perbelanjaan agregat. Wang yang mengalir ke luar negara juga mengurangkan rizab mata wang asing negara dan imbangan mengurangkan rizab mata wang asing negara dan imbangan pembayaran.pembayaran.

3. Exposed to the risk of exchange rate changes / 3. Exposed to the risk of exchange rate changes / Terdedah kepada risiko perubahan kadar pertukaranTerdedah kepada risiko perubahan kadar pertukaranLoans from abroad are exposed to the risk of exchange Loans from abroad are exposed to the risk of exchange rate increases. For example, the increase in UD dollar rate increases. For example, the increase in UD dollar means more Malaysian ringgit will be required to pay the means more Malaysian ringgit will be required to pay the debt in US dollar terms.debt in US dollar terms.Pinjaman dari luar negara terdedah kepada risiko kenaikan Pinjaman dari luar negara terdedah kepada risiko kenaikan kadar pertukaran. Sebagai contoh, peningkatan dalam US kadar pertukaran. Sebagai contoh, peningkatan dalam US dollar bermakna lebih banyak ringgit Malaysia diperlukan untuk dollar bermakna lebih banyak ringgit Malaysia diperlukan untuk membayar hutang dalam US dollar.membayar hutang dalam US dollar.