Budget 2019 likely to see cuts in defence, public infrastructure spending

We will likely see more allocations for low-and mid-income groups in housing, health and education


THE upcoming 2019 budget presentation will likely see cutbacks in military spending and delays in public infrastructure projects as the new government sets to reduce the country’s ballooning debt.

Prime Minister (PM) Tun Dr Mahathir Mohamad pledged to cut Malaysia’s debts and liabilities — estimated at over RM1 trillion or 65% of GDP. The PM has cut minister’s salaries, scrapped Chinese-backed deals, delayed the high-speed rail project to neighbour Singapore and terminated hundreds of government contract staff.

Budget 2019 — the first national budget in the “new Malaysia” era — is already being earmarked as a lean fiscal policy by experts with allocations for both operating and developmental expenditures expected to be trimmed.

Sunway University Business School economist Prof Dr Yeah Kim Leng said Putrajaya may seek to lower its defence spending and shelve some nonessential infrastructure projects in a contracted budget. “Maybe expenses for defence and security will likely see some cuts. Another potential area would be those related to infrastructure because it is long term in nature.

“We may see some reshuffling of priorities on longer term projects where the government could opt to come back to them later,” Yeah told The Malaysian Reserve.

Dr Mahathir’s pacifistic stance on global security is a telling sign of a weaker military budget at home. In his recent trip to the UK, the 93-year-old premier said Malaysia “will survive even with outdated aircraft” and stressed on greater expenditure for education instead of defence.

Under the previous budget, the Barisan Nasional administration granted a 5.3% increase in defence spending to RM15.9 billion, following years of drastic reductions.

Despite the higher allocation, military spending continued to make up only about 1.1% of total government expenses.

The country spent about RM100 billion on staff salaries and pension payments to retirees.

In August, the newly appointed Defence Minister Mohamad Sabu revealed that Malaysia’s military lagged behind the armed forces of its neighbouring countries including Indonesia and Vietnam. The lack of operational funding given to the Royal Malaysian Air Force in recent years has kept 14 of the country’s 18 Russian-made fighter jets grounded, he said, adding that the mandatory servicing of the jets also had to be done locally, not by the manufacturer.

Yeah said due to the government’s cash-strapped position, most of the taxpayers’ money is likely channelled into efforts to reduce living costs and alleviate the economic well-being of the poor.

“In line with the new government’s policy direction in emphasising growth with equity, we will likely see increased allocations for the low-and mid-income groups, particularly in housing, health and education.

“These are the three-pronged thrusts that will be the focus of the budget, given the emphasis to mitigate the rising cost of living on lower income groups, putting in practice the idea of an inclusive growth,” he said.

Galen Centre for Health and Social Policy CEO Azrul Mohd Khalib agreed and expected most ministries to experience reductions in allocation. He said the difference will be in the magnitude and scale of the cutbacks.

“The government will attempt to reallocate funding based strictly on a needs-based budgeting approach.

“But realistically, it is uncertain at this point whether the government is able to accurately and sufficiently ascertain the actual needs of the different ministries, to properly allocate the budget by utilising this approach within the existing timeframe,” Azrul said.