PUBLIC FINANCE AND FISCAL RESPONSIBILITY ACT 2023

Public Finance and Fiscal Responsibility LAWS OF MALAYSIA Act 850 PUBLIC FINANCE AND FISCAL RESPONSIBILITY ACT 2023 1 2 Laws of Malaysia Act 850 Date of Royal Assent ... ... 27 December 2023 Date of publication in the Gazette ... ... 29 December 2023 Publisher’s Copyright C PERCETAKAN NASIONAL MALAYSIA BERHAD All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording and/or otherwise without the prior permission of Percetakan Nasional Malaysia Berhad (Appointed Printer to the Government of Malaysia). Public Finance and Fiscal Responsibility 3 LAWS OF MALAYSIA Public Finance and ActFiscal 850 Responsibility PUBLIC FINANCE AND FISCAL RESPONSIBILITY PUBLIC FINANCE BILL 2023 AND FISCAL RESPONSIBILITY ACT 2023 CLAUSES ARRANGEMENT OF SECTIONS PART I I Chapter PRELIMINARY PRELIMINARY Section Clause 1. Short title and commencement 2. Application 3. Act to be read together with relevant written laws 4. Interpretation PART II PRINCIPLES OF FISCAL POLICY 5. Fiscal policy objectives 6. Formulation of fiscal policy, etc. 7. Gross domestic product 8. Fiscal objectives and quantified values 9. Medium Term Fiscal Framework PART III KEY COMPONENTS OF FISCAL POLICY Division 1 Revenue 10. Formulation of revenue policy 11. Revenue policy 12. Responsibility of Minister in relation to revenue policy 1 24 Laws ofBill Malaysia Act 850 Division 2 Public expenditure Section Clause 13. Formulation of public expenditure policy 14. Public expenditure policy 15. Responsibility of Minister in relation to public expenditure Division 3 Borrowing and debt management 16. Formulation of borrowing and debt management policy 17. Borrowing management policy 18. Debt management policy 19. Responsibility of Minister in relation to borrowing and debt management Division 4 Fiscal risk management 20. Formulation of fiscal risk management policy 21. Responsibility of Minister in relation to fiscal risk management 22. Disclosure of fiscal risk 23. Limiting exposure to fiscal risk 24. Mitigation plan in relation to financial guarantee 25. Responsibilities to submit financial statement PART IV FISCAL ADJUSTMENT PLAN 26. Temporary deviation 27. Non-achievement of fiscal objectives and quantified values Public Finance and Fiscal Responsibility PART V FISCAL POLICY COMMITTEE Section Clause 28. Establishment of Committee 29. Members of Committee 30. Duties and responsibilities of Committee 31. Subcommittee PART VI REPORTING Division 1 Annual budget documents 32. Economic outlook report 33. Fiscal outlook report 34. Revenue estimates 35. Expenditure estimates Division 2 Mid-year expenditure performance report, fiscal risk statement and tax expenditure statement 36. Mid-year expenditure performance report 37. Fiscal risk statement 38. Tax expenditure statement FIRST SChEdULE SECONd SChEdULE 53 6 Laws of Malaysia Act 850 7 5 Public Finance and Fiscal Responsibility Public Finance and Fiscal Responsibility LAWS OF MALAYSIA A BILL Act 850 i n tFINANCE i t u l e d AND PUBLIC FISCAL RESPONSIBILITY ACT 2023 An Act to make provisions on the responsibilities, accountability, and transparency transparencyofofthethe Government managing governance and Government in, in, managing the the public finances and fiscal risk specifically in to relation to public finances and fiscal risk specifically in relation revenue, revenue, expenditure, borrowing the reporting of budget annual expenditure, borrowing and debt;and thedebt; reporting of annual budget documents and publication other documents; and documents and publication of other of documents; and to make to make provisions other connected matters connected provisions for other for matters therewith.therewith. [ ] ENACTED by the Parliament of Malaysia as follows: PART I PRELIMINARY Short title and commencement 1. (1) (1) This ThisAct Actmay maybe be cited as Public the Public Finance and cited as the Finance and Fiscal Fiscal Responsibility Act 2023. Responsibility Act 2023. (2) This ThisAct Actcomes comesinto intooperation operationonona date a date to be appointed (2) to be appointed by by Minister by notification in Gazette, the Gazette, andMinister the Minister the the Minister by notification in the and the may may appoint different for theinto coming intoofoperation appoint different dates fordates the coming operation different of different parts orofprovisions parts or provisions this Act. of this Act. Application 2. This Act shall apply to the Government and Government entities. 68 Laws ofBill Malaysia Act 850 Act to be read together with relevant written laws 3. This Act shall be read together with the relevant written laws and the to,to, andand notnot in the provisions provisions of of this thisAct Actshall shallbebeininaddition addition derogation of, of, thethe provisions of of thethe relevant written laws. in derogation provisions relevant written laws. Interpretation 4. In this Act, unless the context otherwise requires— “borrowing” means loans raised or moneys received under the Acts as specified in the Second Schedule; “Committee” means the Fiscal Policy Committee established under section 28; “debt” means all accumulated borrowings made by the Government; “debt service charges” means any interest or profit rate and other expenses incurred in connection with the borrowing for which the Government is liable and is charged to the Federal Consolidated Fund; “development expenditure” means moneys applied for the purposes specified in the First Schedule of the Development Funds Act 1966 [Act 406]; “economic indicator” indicator” means means an an indicator indicatorused usedininpreparing preparinga forecasted a forecastedfiscal fiscalposition, position,including includingbut butnot notlimited limited to to gross gross domestic product, commodity prices and foreign currency exchange rate; “financial guarantee” means any guarantee given under subsection 14(1) of the Financial Procedure Act 1957 [Act 61], section 2 of the Loan Guarantee Act 1972 [Act 66], subsection 2(1) of the Loans Guarantee (Bodies Corporate) Act 1965 [Act 96] and section 2 of the Loan Guarantee Act 1963 [Act 412]; “financial year” means meansa aperiod periodof oftwelve twelve months ending “financial year” months ending on on of December in any year; the the 31st31st dayday of December in any year; “fiscal balance” means the difference between total revenue and total expenditure; Public Finance and Fiscal Responsibility 97 “fiscal objectives” means the objectives set by the Government under section 8; “fiscal position” means the financial position of the Government consisting of revenue, expenditure, loan recovery and fiscal balance; “fiscal risk” means transactions or circumstances referred to in subsection 20(2); “Government entities” means— (a) any company incorporated under the Companies Act 2016 [Act 777] where— (i) in the case of a company limited by shares, the Minister of Finance incorporated under the Minister of Finance (Incorporation) Act 1957 [Act 375] having moremore than than fifty 375]isisa shareholder a shareholder having per theofshares of theofcompany; or or fiftycent per of cent the shares the company; (ii) in the case of a company limited by guarantee, the Minister of Finance incorporated under the Minister of Finance (Incorporation) Act 1957 is a member of the company; (b) any body corporate incorporated under the Trustees (Incorporation) Act 1952 [Act 258] by the Government; and (c) any statutory body established under an Act of Parliament and is a public authority or an agency of the Government but does not include local authority; “gross domestic product” has the meaning assigned to it under section 7; “long term” means a period beyond five years; “Minister” means the Minister charged with the responsibility for finance; “medium term” means a period between three to five years; 810 Laws ofBill Malaysia Act 850 “Medium Term Fiscal Framework” means the framework formulated by the Minister under section 9; “operating expenditure” means expenditures referred to in Articles 98, 100, 101, 102 and 103 of the Federal Constitution; “other liabilities” means other financial liabilities arising from realisation of financial guarantee or any other obligation that requires allocation from the Federal Consolidated Fund; “public-private partnership” means a form of cooperation between the Government and private sector whereby a stand-alone business is created, funded and managed by the private sector on behalf of the Government that encompasses construction, management, maintenance and repair works, and replacement of public amenities such as buildings, infrastructures, equipment and facilities; “quantified values” means the numerical target for fiscal objectives; “revenue” means moneys received by the Government and paid into the Federal Consolidated Fund in accordance with Clause (1) of Article 97 of the Federal Constitution and accounted in the 7(a)7(a) of the Consolidated Consolidated Revenue RevenueAccount Accountunder underparagraph paragraph of the Financial Procedure 1957; the Financial Procedure ActAct 1957; “the Government” means the Federal Government. PART II PRINCIPLES OF FISCAL POLICY Fiscal policy objectives 5. The Minister is responsible for formulating and implementing fiscal policy of the Government with the objectives of ensuring sustainability of public finance, preserving macroeconomic stability and safeguarding the well-being of the people. Public Finance and Fiscal Responsibility 119 Formulation of fiscal policy, etc. 6. (1) The formulation of fiscal policy shall be based on but not limited to the following general principles: (a) accountability, which means the accountability of the Government in carrying out its responsibilities to manage fiscal policies; (b) responsibility, which means the responsible management of Government resources and management of fiscal risks to maintain fiscal and environmental sustainability; (c) transparency, which means timely publication of financial and non-financial information relating to the management of fiscal policy so as to allow the effective assessment on the conduct of fiscal policy and the state of the public finances; and (d) intergenerational equity, which means the management of fiscal policy shall consider the impact on the well-being of the current and future generations. (2) To achieve the fiscal policy objectives in section 5, the Government’s fiscal policy shall be based on the principles of responsible fiscal management as follows: (a) ensuring macroeconomic stability; (b) achieving and maintaining a sustainable fiscal balance; (c) achieving and maintaining a prudent debt level; and (d) ensuring effective fiscal risk management. Gross domestic product 7. Gross domestic product shall be the latest available nominal gross domestic product of Malaysia as confirmed by the Minister. 12 10 Laws ofBill Malaysia Act 850 Fiscal objectives and quantified values 8. (1) In accordance with the principles of responsible fiscal management in shall pursue its in subsection subsection6(2), 6(2),thetheGovernment Government shall pursue fiscal objectives as follows: its fiscal objectives as follows: (a) to ensure a minimum annual development expenditure incurred as a percentage of gross domestic product in generating economic growth; (b) to achieve a sustainable fiscal balance as a percentage of gross domestic product in the medium term; (c) to achieve a prudent debt level as a percentage of gross domestic product in the medium term; and riskrisk in relation to any (d) to limit limit the the exposure exposureto tofiscal fiscal in relation to financial guarantees as as a percentage any financial guarantees a percentageofofgross gross domestic product. (2) The fiscal objectives shal