Govt to maintain RM8b grants to all states

Federal govt also sets aside RM430m to state reserve fund in 2020


The federal government will maintain its RM8.16 billion grants to all states in the country as the Pakatan Harapan administration seeks to keep its pledge to empower states’ financial position.

The National Finance Council meeting, chaired by Prime Minister Tun Dr Mahathir Mohamad yesterday, decided to maintain the allocations set for the states this year.

The federal government also set a RM430 million contribution to the state reserve fund in 2020. The committed contribution to the state reserve fund was RM330 million this year and RM290 million next year.

The National Finance Council’s meeting yesterday was the first for this year after the last meeting was held on June 14, 2017. Article 108 of the Federal Constitution stipulates that a meeting should be held at least once within 12 months.

Also present at the meeting were Deputy Prime Minister Datuk Seri Dr Wan Azizah Wan Ismail, Finance Minister Lim Guan Eng and the heads of several states.

“The fund allocation to the state reserve fund in 2020 is mainly to finance states with deficits, with an allocation of up to RM150 million,” the Finance Ministry said in a statement. “Approval for the RM430 million allocation should be applied two years earlier as the National Financial Council meeting is held once a year and so that the amount can be taken into account in the preparation of the federal budget of that year.

“This is to ensure that state reserve funds are at an adequate level and are available to assist states facing deficit and financial problems,” the ministry added.

In 2017, states that received the deficit grant included Kelantan with RM54.8 million and Perlis RM38.4 million — both states experienced an operating account deficit in 2016.

A contribution of RM280 million will also be made to finance grants based on the economic, infrastructure and wellbeing developments. The grant is to help the states increase their development expenditure to offset development throughout the country.

In 2018, the grant was paid to seven states, namely Kedah with RM24.4 million, Kelantan (RM28.5 million), Sarawak (RM23.8 million), Terengganu (RM27.7 million), Perlis (RM23.3 million), Penang (RM13.5 million) and Perak (RM21 million).

Meanwhile, speaking to reporters after the meeting at the Finance Ministry in Putrajaya, Terengganu Mentri Besar Ahmad Samsuri Mokhtar said the federal government has agreed to pay royalties to all oil-producing states, honouring another election pledge of Pakatan Harapan.

The assurance was given by Dr Mahathir during the meeting, with assured direct payments to the states.

“Tun (Dr Mahathir) had informed that state governments which are entitled to oil royalties will have the payments channelled directly to the state administration,” he said.

Ahmad said the royalty quantum, amount and payment date are yet to be discussed, but added that Sabah and Sarawak will receive the royalties too.

“The quantum will be informed later. The current rate is at 5%, but was channelled to the state central agency…now, it will be direct to the state government,” he added.