I read with interest of a government minister's statement a month ago that under the 9th Malaysia Plan, there would be welfare payment for the elderly, the sick and the poor. A deputy minister even said that help would be made available for single mothers in the form of micro loans.

I still cannot figure out how much these welfare payments will amount in terms of ringgit and more importantly, how they will reach to those in need. Do we expect the old folk and single mothers to find their way to the offices of the social welfare departments, fill up pages of forms and ensure that they are counter-signed by the 'ketua kampung'?

I would actually suggest that social welfare officers be more proactive and visit the villages to find out first-hand who are we missing out on what. After all, some of these needy people have difficulty going to the nearest town.

I would also suggest that the welfare payments be calculated depending on the need of the households concerned; how many children or dependants there are and what kind of expenses they incur.

But the big question remains - how are we going to finance this welfare plan without going into large fiscal deficit?

Simply, the solution can be summarised into three words - taxes, surcharge and/or monetary expansion. In Malaysia's situation, where any increase in taxes or imposition of surcharges is unpalatable to the voters, printing more money has always been the solution taken by the government. Different countries have their own way of financing their social welfare.

In New Zealand, Australia and Britain, income and corporate taxes are raised to a level that covers the financial obligation of those countries to their needy. Depending on the total number of pensioners, single parents, sickness beneficiaries and the unemployed, the welfare portion of national budget could be as high as 20 percent.

In the US, there is a surcharge on income taxes as a form of social insurance whereby those who work pay a portion of their income in addition to income tax. In Iran, monetary expansion is employed which simply means printing more money. This would normally be the case for countries without a large tax base.

In Japan, investment income is used whereby savings from previous decades salted away are invested to earn income. These incomes are used to finance social welfare payments.

It would not be advisable these days to print money at a rate higher than a country's natural economic growth rate lest inflation becomes unmanageable. When you see a country with a very high inflation rate, it is a sure telltale sign of large budget deficit being covered by printing money.

In the case of Malaysia, where the tax base is not so large and investment income is still low, the only responsible way of financing social welfare would be by money from taxes.

But there may not necessarily be any increase in taxes if government income can exceed its spending by a wide margin to create a budget surplus. In the next few years, there could be budget surpluses after consumption taxes (sales tax, value added tax [VAT] or a form of goods and services tax) are phased in from 2007.