The purported news of government withdrawing the scholarships and bursaries makes me ponder over our personal finance and how we can draw some parallels on government financial management.

I am not a finance wizard, a great entrepreneur or a prominent politician in charge of national finance.

But the reality is most of us are likely to be ordinary guys earning a normal income and living an ordinary life. The reality is most politicians and bureaucrats governing us and managing our economy are also ordinary people with an average intelligence or even lesser than that.

I think we have to be realistic; what we ordinary guys can’t do at personal level, we shouldn’t expect the government tol be able to do.

If at a personal level we shouldn’t squander our income, borrow thoughtlessly and take risks excessively, the national government too shouldn’t do likewise. The government can’t do wonders for things that we can’t do ourselves.

If we are not gifted with making lots of money or showered with boundless inheritance, we should always live within our means. We may borrow to buy some big ticket items like homes and cars, but certainly we can’t borrow or run credit card debt on current expenditures like buying groceries, paying house rent, eating in fanciful restaurants or going for holidays. If we do that, it means two things – either our income is too low or our lifestyle is not in consonance with our income. The solution is to increase our income or change our lifestyle. Taking more loans is not a solution. In fact, it will only add to more woes.

I think this is the situation many Malaysians are now faced with. We borrow because easy loans are available and the process is really to help the banks make more money than to help us solve our problems. We live beyond our means because we want to keep up with the Joneses. We treat loans like income, thinking that our income growth will be sufficient to take care of loan repayments in the future. Most of us know there is no free lunch and yet many of us take it.

Then we look at the government, which to me is worse than individuals. The government deliberately grows its expenditure to match with revenue availability. Not only that, the government continues to borrow because government spending must be maintained to keep certain people/sectors happy.

Do you think the government would have solved its fiscal problems with GST now in place if oil prices had not dropped precipitously? I don’t think so. The government will incur new expenditure to match with additional revenues provided by GST and whatever borrowings it could lay its hands on. This is a habitual issue – big spending must continue to keep the politicians and vested interest groups happy, not so much to benefit the economy in terms of capacity building or productivity enhancement.

Soon, the government will face the same problems like individuals who do not know how to manage their finances. Wasteful spending can’t build human/social capital and infrastructure. Excessive borrowing increases the debt servicing burden and increases the cost of borrowing which further reduces the government’s ability to spend. Depending on sources of financing, excessive borrowing by the government are inflationary which erodes the value of the currency.

So when the crunch comes, the government is at a loss on what to do. It cuts the allocations for education and scholarships not because these are the least important things to have, but because they affect the vested interests least. If we look at it at the individual level, it is like a person cutting expenditure on his child’s education so that the family can go for holidays instead.

I think here lies the big irony. Many Malaysians actually look to government for help – BR1M, scholarships, healthcare and other welfare payments. On the contrary, the government is increasingly looking to the people for bailouts – more taxes, more borrowings and higher inflation.

Certain mantras are worth repeating. We can’t solve fundamental problems by skirting around the peripheries. Fiscal reforms must include reprioritisation and prudent spending. I agree all of us must shoulder the burden with budget cuts, but it is only fair that those enjoying the most thus far take a deeper cut. Politicians and bureaucrats ought to know what to cut and where to prioritise. If they don’t, then they are engaged in bunkum polemics.

If we think education and scholarships are important, then something must give. Taking the path of least resistance, to me, is not recalibrating the budget. It is a great charade.

TK Chua is an FMT reader

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