Balancing the Budget – Malaysia vs Germany


Achieving a balanced budget is no easy task – especially when the task involves distributing tax money and maintaining an inclusive social responsibility – but the Germans seem to have found an optimal method.

Malaysia has always respected Germany and its economic accomplishments – something Prime Minister Datuk Seri Najib Tun Razak himself mentioned when he tabled Budget 2015: Germany began its “economic progress based on agriculture and has since moved to an economy that emphasises high level of knowledge, skills, innovation and expertise”.

With this in mind, Malaysia might do well to take some lessons from Germany with regards to its constitutional balanced budget targeting as well as its tax sharing system. Both countries are constituted as federal countries after all.

Balanced budget by constitutional requirement

In 2009, Germany added a debt break (“Schuldenbremse”) into the constitution that forbids running a structural deficit after 2016 of more than 0.35% of the general GDP.

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