The document discusses the economic functions of governments and the role they play in ensuring stability and economic growth. It outlines several key functions including adjusting resource allocation, assisting the private sector with stabilization, creating a business environment, redistributing income, and providing a legal framework. It also discusses national budgets, types of budgets (balanced, surplus, deficit), sources of government revenue (taxes, non-tax revenues), objectives and types of taxation (direct, indirect), and categories of government expenditure (operating, development).

1. MACROECONOMICSMACROECONOMICS
ROLE OF GOVERNMENTROLE OF GOVERNMENT

2. ECONOMIC FUNCTION OF GOVERNMENTECONOMIC FUNCTION OF GOVERNMENT
The government plays an important role in ensuring the stability and economic growth ofThe 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 importantThe 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 the1. 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 by2. 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. 3. Governments will create a business environment, which3. Governments will create a business environment, which
encourages competition among producers. This canencourages competition among producers. This can
increase efficiency in the utilization of resources andincrease efficiency in the utilization of resources and
produce better quality products. Governments will alsoproduce 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 among4. Governments will redistribute income and wealth among
the population. Governments will control the incomethe population. Governments will control the income
disparity between the rich and poor through taxation anddisparity between the rich and poor through taxation and
transfer paymentstransfer payments

4. 5. Governments will create a business environment, which5. Governments will create a business environment, which
encourages competition among producers. This canencourages competition among producers. This can
increase efficiency in the utilization of resources andincrease efficiency in the utilization of resources and
produce better quality products. Governments will alsoproduce 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 among6. Governments will redistribute income and wealth among
the population. Governments will control the incomethe population. Governments will control the income
disparity between the rich and poor through taxation anddisparity between the rich and poor through taxation and
transfer paymentstransfer payments

5. 7. Governments will provide a legal framework and a7. Governments will provide a legal framework and a
social framework for the effective operation of ansocial framework for the effective operation of an
economy. A legal framework includes the legal status ofeconomy. A legal framework includes the legal status of
business enterprises, private ownership and others.business enterprises, private ownership and others.

6. NATIONAL BUDGETNATIONAL BUDGET
A national budget is a document containing a preliminary approval planA 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 kelulusanBelanjawan negara adalah dokumen yang mengandungi pelan kelulusan
awal daripada hasil awam dan perbelanjaan dalam setahun.awal daripada hasil awam dan perbelanjaan dalam setahun.

7. BELANJAWAN NEGARABELANJAWAN NEGARA
Belanjawan adalah “satu penyataan Anggaran Hasil dan PerbelanjaanBelanjawan adalah “satu penyataan Anggaran Hasil dan Perbelanjaan
bagi tahun hadapan yang digunakan sebagai alat perancangan danbagi tahun hadapan yang digunakan sebagai alat perancangan dan
pengurusan sumber ekonomi negara untuk memenuhi keperluan rakyat”pengurusan sumber ekonomi negara untuk memenuhi keperluan rakyat”

8. 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

9. 1. Balanced Budget1. Balanced Budget
A balanced budget occurs when the government’s totalA 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 Budget
A surplus budget occurs when the government’s totalA surplus budget occurs when the government’s total
revenue is more than its total expenditure. A governmentrevenue is more than its total expenditure. A government
with a surplus budget can pay up its debts or earn interestwith a surplus budget can pay up its debts or earn interest
on funds.on funds.

10. 3.3. Deficit BudgetDeficit Budget
A deficit budget occurs when the government’s totalA 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 borrowA 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.

11. GOVERNMENT REVENUEGOVERNMENT REVENUE
Sources of RevenueSources of Revenue
1. Tax Revenue1. Tax Revenue
Tax is compulsory contribution by an individual or a firm to the government to be used in theTax 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 theTax 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.
..

12. Direct tax revenue includes individual income tax,Direct tax revenue includes individual income tax,
companies’ income tax, petroleum income tax, stampcompanies’ 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, salesIndirect tax includes import duties, excise duties, sales
tax, service tax, gaming tax, etc.tax, service tax, gaming tax, etc.

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

14. 2. Non-tax Revenue2. Non-tax Revenue
Non-tax revenues are revenues which arise from otherNon-tax revenues are revenues which arise from other
sources besides tax. Non-tax revenue includes revenuesources besides tax. Non-tax revenue includes revenue
from licenses and permits, petroleum royalty, interest andfrom licenses and permits, petroleum royalty, interest and
returns on investment, fees and penalties.returns on investment, fees and penalties.
Pendapatan kerajaan yang diperoleh daripada bayaranPendapatan 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, danbayaran denda yang ditentukan oleh undang-undang, dan
lesen.lesen.

15. 3. Non-tax Receipts3. Non-tax Receipts
Non-revenue receipts include refunds of expenditureNon-revenue receipts include refunds of expenditure
and receipts from government agencies.and receipts from government agencies.

16. TAXATIONTAXATION
Taxes are the most important source of government revenue.Taxes are the most important source of government revenue.
Objectives of TaxationObjectives of Taxation
IncomeIncome
Taxes are the most important source of income for the government andTaxes 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.

17. Equitable distribution of incomeEquitable distribution of income
Taxation reduces the inequality of income between the rich andTaxation reduces the inequality of income between the rich and
the poor. Examples of this type of taxation are income tax andthe 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 inTaxation is imposed on goods such as cigarettes and alcohol in
order to restrain people from consuming these. Higher taxesorder 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.

18. Regulation of Foreign TradeRegulation of Foreign Trade
Taxes are levied on imported goods to protect localTaxes 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 coalTaxes are also imposed on scarce resources such as coal
and petroleum so as to increase their price andand petroleum so as to increase their price and
discourage exports.discourage exports.

19. 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

20. DIRECT TAXESDIRECT TAXES
Direct taxes are taxes that are directly imposed on individuals or bodiesDirect 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.

21. INDIRECT TAXESINDIRECT TAXES
Indirect taxes are taxes that are indirectly imposed on parties that areIndirect 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 governmentFor example, producers can transfer taxes imposed by the government
to consumers by including the value of the taxes in the price of goodsto 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 issold. 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.

22. 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

23. PROPORTIONAL TAXPROPORTIONAL TAX
A proportional tax is a tax which is imposed at the sameA proportional tax is a tax which is imposed at the same
rate for all income levels. The tax rate remains constantrate 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 kadarCukai berkadar ialah cukai yang dikenakan pada kadar
yang sama bagi semua peringkat pendapatan. Kadaryang sama bagi semua peringkat pendapatan. Kadar
cukai masih tetap tidak kira sama ada peningkatan ataucukai masih tetap tidak kira sama ada peningkatan atau
penurunan pendapatan.penurunan pendapatan.
Example: Corporate Income TaxExample: Corporate Income Tax

24. PROPORTIONAL TAXPROPORTIONAL TAX
Income 500 1000 1500 2000 2500
Total
taxes
25 50 75 100 125
Tax rate 5% 5% 5% 5% 5%

25. 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

26. PROGRESSIVE TAXPROGRESSIVE TAX
Income 500 1000 1500 2000 2500
Total
taxes
25 80 150 240 375
Tax rate 5% 8% 10% 12% 15%

27. REGRESSIVE TAXREGRESSIVE TAX
A regressive tax is a tax which falls with an increase income. AA 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. ApabilaCukai regresif adalah bertentangan dengan cukai progresif. Apabila
pendapatan lebih tinggi, lebih rendah peratusan cukai.pendapatan lebih tinggi, lebih rendah peratusan cukai.

28. REGRESSIVE TAXREGRESSIVE TAX
Income 500 1000 1500 2000 2500
Total
taxes
50 80 90 80 50
Tax rate 10% 8% 6% 4% 2%

29. GOVERNMENT EXPENDITUREGOVERNMENT EXPENDITURE
There are two categories of government expenditure:There are two categories of government expenditure:
Operating expenditureOperating expenditure
Development expenditureDevelopment expenditure

30. GOVERNMENT OPERATING EXPENDITUREGOVERNMENT OPERATING EXPENDITURE
Operating expenditure is the government expenditure allocated to coverOperating 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 diperuntukkanPerbelanjaan operasi adalah perbelanjaan kerajaan yang diperuntukkan
untuk menampung perbelanjaan mengurus dan mentadbir jabatanuntuk menampung perbelanjaan mengurus dan mentadbir jabatan
kerajaankerajaan..

31. Operating expenditure consists of emoluments, pensionsOperating expenditure consists of emoluments, pensions
and gratuities, debts, service charges, supplies andand gratuities, debts, service charges, supplies and
services, subsidies, asset acquisitions, grants andservices, subsidies, asset acquisitions, grants and
transfers and other types of expenditure.transfers and other types of expenditure.
Perbelanjaan operasi terdiri daripada emolumen, pencenPerbelanjaan operasi terdiri daripada emolumen, pencen
dan ganjaran, hutang, bayaran perkhidmatan, bekalandan ganjaran, hutang, bayaran perkhidmatan, bekalan
dan perkhidmatan, subsidi, pemerolehan aset, pemberiandan perkhidmatan, subsidi, pemerolehan aset, pemberian
dan bayaran pindahan dan lain-lain jenis perbelanjaan.dan bayaran pindahan dan lain-lain jenis perbelanjaan.

32. GOVERNMENT DEVELOPMENT EXPENDITUREGOVERNMENT DEVELOPMENT EXPENDITURE
Development expenditure is government expenditure for investmentDevelopment 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 untukPerbelanjaan pembangunan merupakan perbelanjaan kerajaan untuk
tujuan pelaburan untuk menambah baik kemudahan infrastruktur fizikaltujuan pelaburan untuk menambah baik kemudahan infrastruktur fizikal
asas.asas.

33. Government development expenditure is focused onGovernment development expenditure is focused on
development project that can boost economic growth.development project that can boost economic growth.
Perbelanjaan pembangunan Kerajaan memberi tumpuanPerbelanjaan pembangunan Kerajaan memberi tumpuan
kepada projek pembangunan yang boleh merangsangkepada projek pembangunan yang boleh merangsang
pertumbuhan ekonomi.pertumbuhan ekonomi.
Development expenditure consists of the following:Development expenditure consists of the following:

34. Defence and SecurityDefence and Security
Economic ServicesEconomic Services
Economic services comprise agriculture and rural development, tradeEconomic services comprise agriculture and rural development, trade
and industry, transport, public utilities and other services, includingand 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 pembangunanPerkhidmatan ekonomi terdiri daripada pertanian dan pembangunan
luar bandar, perdagangan dan industri, pengangkutan, kemudahanluar bandar, perdagangan dan industri, pengangkutan, kemudahan
awam dan perkhidmatan lain, termasuk komunikasi, kajianawam dan perkhidmatan lain, termasuk komunikasi, kajian
kemungkinan dan sumber mineral.kemungkinan dan sumber mineral.

35. Social ServicesSocial Services
Social services comprise education, health, housing, andSocial services comprise education, health, housing, and
social and community services.social and community services.
General AdministrationGeneral Administration
General Administration includes the Department of PublicGeneral 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, andRoyal Customs and Excise, Department of Statistics, and
the Ministry of Foreign Affairs.the Ministry of Foreign Affairs.

36. PUBLIC DEBTPUBLIC DEBT
Public debt means the debt which a government owes to its subjects orPublic debt means the debt which a government owes to its subjects or
to the nation of other countries. If the government revenue from taxationto the nation of other countries. If the government revenue from taxation
and non-tax revenue are insufficient to meet the rising cost ofand 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.

37. SOURCES OF PUBLIC DEBTSOURCES OF PUBLIC DEBT
Public borrowing comes from two different sources, which can either be internalPublic 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 savingBorrowing from citizens through the sale of securities, bonds and saving
certificates to citizens.certificates to citizens.
Meminjam daripada rakyat melalui penjualanMeminjam daripada rakyat melalui penjualan sekuriti, bon dansekuriti, bon dan
menyimpan sijil kepada rakyat.menyimpan sijil kepada rakyat.

38. b) Borrowing from financial institutions such as insuranceb) Borrowing from financial institutions such as insurance
companies by investing their resources in the purchase ofcompanies 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 merekasyarikat insurans dengan melabur sumber-sumber mereka
dalam pembelian sekuriti kerajaan.dalam pembelian sekuriti kerajaan.

39. c) Loans from the Central Bank where the central bankc) Loans from the Central Bank where the central bank
purchases government securities, bonds and debenturespurchases government securities, bonds and debentures
from the government.from the government.
Pinjaman daripada Bank Negara di mana bank pusatPinjaman daripada Bank Negara di mana bank pusat
membeli sekuriti kerajaan, bon dan debentur daripadamembeli sekuriti kerajaan, bon dan debentur daripada
kerajaan.kerajaan.

40. d) Loans from commercial banks where the commerciald) Loans from commercial banks where the commercial
banks invest a part of their deposits in government bondsbanks 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 bankPinjaman daripada bank-bank perdagangan di mana bank
perdagangan melabur sebahagian daripada simpananperdagangan melabur sebahagian daripada simpanan
mereka dalam bon dan sekuriti kerajaan untuk memenuhimereka dalam bon dan sekuriti kerajaan untuk memenuhi
keperluan kecairan.keperluan kecairan.

41. EXTERNAL SOURCESEXTERNAL SOURCES
International money market such as some foreign exchange bank inInternational money market such as some foreign exchange bank in
Paris, London and New York which have big deposits to lend anyParis, 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 diPasaran wang antarabangsa seperti beberapa bank pertukaran asing di
Paris, London dan New York yang mempunyai deposit yang besar untukParis, 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.

42. Currency loans from foreign governments such as theCurrency loans from foreign governments such as the
USA, UK, Germany and Japan for the supply of neededUSA, 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 AmerikaPinjaman mata wang daripada kerajaan asing seperti Amerika
Syarikat, United Kingdom, Jerman dan Jepun untukSyarikat, United Kingdom, Jerman dan Jepun untuk
membekalkan barang-barang yang diperlukan. Pinjaman inimembekalkan barang-barang yang diperlukan. Pinjaman ini
akan didokumenkan dalam kontrak.akan didokumenkan dalam kontrak.

43. Loans from International Financial Institutions such asLoans from International Financial Institutions such as
International Monetary Fund (IMF) which gives loans toInternational Monetary Fund (IMF) which gives loans to
its members on a short-term basis and the World Bankits members on a short-term basis and the World Bank
which gives long-term loans for economic developmentwhich gives long-term loans for economic development
on a reasonable rate of interest.on a reasonable rate of interest.
Pinjaman dari Institusi Kewangan Antarabangsa sepertiPinjaman dari Institusi Kewangan Antarabangsa seperti
Tabung Kewangan Antarabangsa (IMF) yang memberiTabung Kewangan Antarabangsa (IMF) yang memberi
pinjaman kepada ahli-ahlinya secara jangka pendek dan Bankpinjaman kepada ahli-ahlinya secara jangka pendek dan Bank
Dunia yang memberikan pinjaman jangka panjang untukDunia yang memberikan pinjaman jangka panjang untuk
pembangunan ekonomi pada kadar faedah yang munasabah.pembangunan ekonomi pada kadar faedah yang munasabah.

44. 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 financeThe national debt exists when the government takes loans to finance
economic development projects. Implementation of development projectseconomic development projects. Implementation of development projects
generate economic growth and create jobs in order to overcome the problemgenerate 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 membiayaiHutang negara wujud apabila kerajaan mengambil pinjaman untuk membiayai
projek-projek pembangunan ekonomi. Pelaksanaan projek-projek pembangunanprojek-projek pembangunan ekonomi. Pelaksanaan projek-projek pembangunan
menjana pertumbuhan ekonomi dan mewujudkan peluang pekerjaan untukmenjana pertumbuhan ekonomi dan mewujudkan peluang pekerjaan untuk
mengatasi masalah pengangguran di negara ini.mengatasi masalah pengangguran di negara ini.

45. 2.2. Economic recovery from recessionEconomic recovery from recession
Budget deficit is used to stimulate economic activity when theBudget deficit is used to stimulate economic activity when the
economy is in recession. Government involvement in economiceconomy is in recession. Government involvement in economic
activities such as construction of infrastructure will increaseactivities such as construction of infrastructure will increase
aggregate spending in the economy and help lift the economyaggregate spending in the economy and help lift the economy
out of recession.out of recession.
Belanjawan defisit digunakan untuk merangsang aktiviti ekonomiBelanjawan defisit digunakan untuk merangsang aktiviti ekonomi
apabila ekonomi berada dalam kemelesetan. Penglibatan Kerajaanapabila ekonomi berada dalam kemelesetan. Penglibatan Kerajaan
dalam aktiviti ekonomi seperti pembinaan infrastruktur akandalam aktiviti ekonomi seperti pembinaan infrastruktur akan
meningkatkan perbelanjaan agregat dalam ekonomi dan membantumeningkatkan perbelanjaan agregat dalam ekonomi dan membantu
meningkatkan ekonomi daripada kemelesetan.meningkatkan ekonomi daripada kemelesetan.

46. 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 produktif
Sales of treasury bills and government securities are a safe tool forSales of treasury bills and government securities are a safe tool for
community savings and higher returns to the people, especially whencommunity savings and higher returns to the people, especially when
interest rates in banks are very low. Funds raised by the governmentinterest 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 yangJualan bil perbendaharaan dan sekuriti kerajaan adalah alat yang
selamat untuk simpanan masyarakat dan pulangan yang lebih tinggiselamat untuk simpanan masyarakat dan pulangan yang lebih tinggi
kepada rakyat, terutamanya apabila kadar faedah di bank-bank yangkepada rakyat, terutamanya apabila kadar faedah di bank-bank yang
sangat rendah. Dana yang diperoleh oleh kerajaan boleh digunakan untuksangat rendah. Dana yang diperoleh oleh kerajaan boleh digunakan untuk
membiayai perbelanjaan pembangunan.membiayai perbelanjaan pembangunan.

47. 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 ofFuture generations will bear the burden of national debt in the form of
higher taxes to enable the government to collect revenue for thehigher 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 dalamGenerasi akan datang akan menanggung beban hutang negara dalam
bentuk cukai yang lebih tinggi untuk membolehkan kerajaan untukbentuk cukai yang lebih tinggi untuk membolehkan kerajaan untuk
memungut hasil bagi pembayaran pinjaman yang tertunggak dan faedah kememungut hasil bagi pembayaran pinjaman yang tertunggak dan faedah ke
atas hutang.atas hutang.

48. 2.2. Unequal distribution of incomeUnequal distribution of income
Payment of interest on the sale of government securitiesPayment of interest on the sale of government securities
to the public will benefit only those who are able to buyto the public will benefit only those who are able to buy
these bonds when all segments of society have to bear thethese 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 kepadaBayaran faedah ke atas penjualan sekuriti kerajaan kepada
orang ramai akan memberi manfaat kepada hanya merekaorang ramai akan memberi manfaat kepada hanya mereka
yang mampu untuk membeli bon ini apabila semua lapisanyang mampu untuk membeli bon ini apabila semua lapisan
masyarakat terpaksa menanggung beban cukai untukmasyarakat terpaksa menanggung beban cukai untuk
membayar pokok dan faedah ke atas hutang.membayar pokok dan faedah ke atas hutang.

49. 3.3. Negative impact of currency outflow during debtNegative impact of currency outflow during debt
repayment /repayment / Kesan negatif daripada aliran keluar mataKesan negatif daripada aliran keluar mata
wang dalam pembayaran balik hutangwang dalam pembayaran balik hutang
Payment of interest and principal repayments of external debtPayment of interest and principal repayments of external debt
lead to money flowing out of the country and foreign exchangelead to money flowing out of the country and foreign exchange
reserves will be reduced. If foreign exchange reserves positionreserves 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 menyebabkanBayaran faedah dan bayaran balik hutang luar negeri menyebabkan
wang mengalir keluar dari negara dan rizab pertukaran asing akanwang mengalir keluar dari negara dan rizab pertukaran asing akan
berkurangan. Jika kedudukan rizab pertukaran asing tidak adalahberkurangan. Jika kedudukan rizab pertukaran asing tidak adalah
kukuh, ia boleh menjejaskan kestabilan kadar pertukaran.kukuh, ia boleh menjejaskan kestabilan kadar pertukaran.

50. BENEFITS OF DOMESTIC LOANSBENEFITS OF DOMESTIC LOANS
1. Easier to obtain loans1. Easier to obtain loans
It is easier for the government to borrow from domestic sources with the sale of governmentIt 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 EPFsecurities 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 denganAdalah lebih mudah bagi kerajaan untuk meminjam daripada sumber dalam negeri dengan
penjualan sekuriti kerajaan dan bil perbendaharaan kerajaan kepada institusi kewangan dipenjualan sekuriti kerajaan dan bil perbendaharaan kerajaan kepada institusi kewangan di
negara ini seperti syarikat KWSP dan insurans. Pinjaman dari luar negara melibatkannegara ini seperti syarikat KWSP dan insurans. Pinjaman dari luar negara melibatkan
pembayaran kadar faedah yang lebih tinggi. Pinjaman di negara ini boleh mengatasi masalahpembayaran kadar faedah yang lebih tinggi. Pinjaman di negara ini boleh mengatasi masalah
lebihan mudah tunai di negara ini.lebihan mudah tunai di negara ini.

51. 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 berlaku
Loans in the country do not involve an outflow of moneyLoans 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 wangPinjaman 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.

52. 3. Not exposed to the risk of changes in the rate of3. Not exposed to the risk of changes in the rate of
exchange /exchange / Tidak terdedah kepada risiko perubahan dalamTidak terdedah kepada risiko perubahan dalam
kadar pertukarankadar pertukaran
Loans from domestic sources are not exposed to the risk ofLoans from domestic sources are not exposed to the risk of
exhange rate changes. If the government borrows from foreignexhange rate changes. If the government borrows from foreign
sources, the increase in foreign exchange rates will cause debtsources, the increase in foreign exchange rates will cause debt
to increase.to increase.
Pinjaman daripada sumber dalam negeri tidak terdedah kepadaPinjaman daripada sumber dalam negeri tidak terdedah kepada
risiko perubahan kadar pertukaran. Jika kerajaan meminjam daririsiko perubahan kadar pertukaran. Jika kerajaan meminjam dari
sumber asing, peningkatan dalam kadar pertukaran asing akansumber asing, peningkatan dalam kadar pertukaran asing akan
menyebabkan hutang meningkat.menyebabkan hutang meningkat.

53. DISADVANTAGES OF DOMESTIC LOANSDISADVANTAGES OF DOMESTIC LOANS
1.1. Limited loan resourcesLimited loan resources
 Although the loans are easily available, the market for governmentAlthough the loans are easily available, the market for government
securities is limited. Therefore, the total loans from lending sources insecurities 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 sekuritiMeskipun pinjaman-pinjaman mudah didapati, pasaran untuk sekuriti
kerajaan adalah terhad. Oleh itu, jumlah pinjaman daripada sumberkerajaan adalah terhad. Oleh itu, jumlah pinjaman daripada sumber
pinjaman di negara ini mungkin tidak mencukupi untuk memenuhi keperluanpinjaman di negara ini mungkin tidak mencukupi untuk memenuhi keperluan
kerajaan.kerajaan.

54. 2. Reduces consumption and investment2. Reduces consumption and investment
Government competition with the private sector to acquireGovernment competition with the private sector to acquire
resources in the country’s limited borrowing would raise interestresources in the country’s limited borrowing would raise interest
rates. The increase in domestic interest rates will reducerates. 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 memperolehPersaingan 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 mengurangkanPeningkatan dalam kadar faedah dalam negeri akan mengurangkan
penggunaan dan pelaburan dalam sektor swasta.penggunaan dan pelaburan dalam sektor swasta.

55. 3. Reduces the money supply in the economy /3. Reduces the money supply in the economy /
Mengurangkan penawaran wang dalam ekonomiMengurangkan penawaran wang dalam ekonomi
Sales of government securities and treasury bills of financialSales of government securities and treasury bills of financial
institutions of the government will reduce the liquidity andinstitutions of the government will reduce the liquidity and
money supply in the economy. The decline in excess reservesmoney 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 kewanganJualan sekuriti kerajaan dan bil perbendaharaan institusi kewangan
kerajaan akan mengurangkan mudah tunai dan wang bekalan dalamkerajaan akan mengurangkan mudah tunai dan wang bekalan dalam
ekonomi. Penurunan rizab berlebihan bank perdaganganekonomi. Penurunan rizab berlebihan bank perdagangan
mengehadkan keupayaan bank-bank untuk mewujudkan kredit.mengehadkan keupayaan bank-bank untuk mewujudkan kredit.

56. BENEFITS OF FOREIGN LOANSBENEFITS OF FOREIGN LOANS
1. Wider loans resources1. Wider loans resources
The government has a wider choice in the international financial market in theThe 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 antarabangsaKerajaan mempunyai pilihan yang lebih luas dalam pasaran kewangan antarabangsa
dalam penjualan sekuriti kerajaan seperti New York, London dan Tokyo. Oleh itu, jumlahdalam 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

57. 2. Reduces competition with the private sector /2. Reduces competition with the private sector /
Mengurangkan persaingan dengan sektor swastaMengurangkan persaingan dengan sektor swasta
The government does not have to compete with the privateThe government does not have to compete with the private
sector to get loans from states where funding sources aresector to get loans from states where funding sources are
limited. Thus, the private sector has sufficient funds to financelimited. Thus, the private sector has sufficient funds to finance
projects.projects.
Kerajaan tidak perlu bersaing dengan sektor swasta untukKerajaan tidak perlu bersaing dengan sektor swasta untuk
mendapatkan pinjaman dari negara-negara di mana sumber-sumbermendapatkan pinjaman dari negara-negara di mana sumber-sumber
pembiayaan adalah terhad. Oleh itu, sektor swasta mempunyai danapembiayaan adalah terhad. Oleh itu, sektor swasta mempunyai dana
yang mencukupi untuk membiayai projek-projek.yang mencukupi untuk membiayai projek-projek.

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

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

60. 2. Outflow of funds abroad2. Outflow of funds abroad
Repayment 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 reducesThis reduces the supply of money in the economy and reduces
national income through the fall in aggregate spending. Moneynational income through the fall in aggregate spending. Money
flowing abroad also reduces the country’s foreign currencyflowing 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 mengalirBayaran balik pinjaman dan faedah menyebabkan wang mengalir
keluar. Ini mengurangkan bekalan wang dalam ekonomi dankeluar. Ini mengurangkan bekalan wang dalam ekonomi dan
mengurangkan pendapatan negara melalui kejatuhan dalammengurangkan pendapatan negara melalui kejatuhan dalam
perbelanjaan agregat. Wang yang mengalir ke luar negara jugaperbelanjaan agregat. Wang yang mengalir ke luar negara juga
mengurangkan rizab mata wang asing negara dan imbanganmengurangkan rizab mata wang asing negara dan imbangan
pembayaran.pembayaran.

61. 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 pertukaran
Loans from abroad are exposed to the risk of exchangeLoans from abroad are exposed to the risk of exchange
rate increases. For example, the increase in UD dollarrate increases. For example, the increase in UD dollar
means more Malaysian ringgit will be required to pay themeans 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 kenaikanPinjaman dari luar negara terdedah kepada risiko kenaikan
kadar pertukaran. Sebagai contoh, peningkatan dalam USkadar pertukaran. Sebagai contoh, peningkatan dalam US
dollar bermakna lebih banyak ringgit Malaysia diperlukan untukdollar bermakna lebih banyak ringgit Malaysia diperlukan untuk
membayar hutang dalam US dollar.membayar hutang dalam US dollar.