A RM315b budget and who gets the lion’s share

The Education Ministry is the single-largest recipient with a RM60b allocation

BY DASHVEENJIT KAUR / Pic By BERNAMA

The Pakatan Harapan government surprised the market with an expansionary budget despite widening deficits, RM1 trillion debt and uncertain economic prospects.

Finance Minister Lim Guan Eng’s proposed government expenditure increased 8.4% to RM314.6 billion from this year’s RM290.4 billion, the highest in the country’s 61-year history.

For the proposed expenditure, RM259.9 billion, or 82.6%, will be allocated for operation and RM54.7 billion for development.

The operating expenditure is 10.4% higher than last year, while development expenditure saw a slight decrease from RM54.9 billion.

The pre-budget gloom and doom was practically erased as the higher allocation would continue to support the country’s economic growth.

Lim said the main reason that contributes to the increase is the reclassification of what was categorised as operating allocation to development allocation amounting to RM6.9 billion in 2018 and RM9.7 billion in 2019.

One of the reclassifications is the allocation for Prasarana Malaysia Bhd on the implementation of the light rail transit project and for Suria Strategic Energy Resources Sdn Bhd on gas pipeline projects.

The economic sector receives the highest portion under the development expenditure amounting to RM29.2 billion, covering transportation, trade, industry, energy, public amenities and agriculture.

Not an ‘Austerity’ Budget

Contrary to popular belief, the government did not embark on an austerity drive, despite the need for a strict fiscal discipline and to reduce its debts that stood over RM1 trillion as at end June 2018.

Analysts said the budget is “mildly expansionary” on the back on an upward projection on the country’s revenue growth, despite the absence of Goods and Services Tax (GST).

Fiscal deficit this year is expected to widen to 3.7% of GDP, compared to the initial projection of 2.8% set by the Barisan Nasional administration. This would be a mark of departure from the previous trend of steady fiscal deficit reduction.

“The increase in fiscal deficit arises after we have taken into account previously unbudgeted items such as RM1 billion interest servicing cost for 1Malaysia Development Bhd’s debts and RM1.3 billion in compensation for the acquisition of Eastern Dispersal Link Expressway in Johor, which was announced last year.

“Also, RM1 billion for Prasarana, RM1.4 billion for the Ministry of Transport rail projects and paying back some GST refunds of RM3.9 billion,” Lim said in his budget speech.

Nevertheless, the Pakatan Harapan administration remains committed to fiscal consolidation to achieve a fiscal deficit-to-GDP ratio of 3.4% in 2019; 3% in 2020 and 2.8% in 2021.

The government’s revenue for 2019 is expected to grow 10.7% year-on-year to RM261.81 billion, encompassing the special Petroliam Nasional Bhd dividend of RM30 billion.

The budget will also see an increase of RM1.43 billion to the federal government’s total revenue from tax revenue contribution in 2019, pushing up the figure to RM263.25 billion.

Of this RM1.43 billion, a huge chunk of RM1.05 billion will be contributed by other direct tax, followed by excise duty (RM200 million), service tax (RM100 million) and income tax (RM81.94 million), it said.

As for the country’s GDP forecasts, Lim said 2019’s growth is estimated to be at 4.9% and 4.8% this year.

Allocations to Ministries

The Education Ministry is the single-largest recipient of the federal budget with a RM60.2 billion allocation, or 19.1% of the total budget 2019.

The Prime Minister’s Department’s (PMD) allocation is halved, the largest cut compared to any other ministry.

The Works Ministry; Water, Land, and Natural Resources Ministry; Federal Territories Ministry; Energy, Science, Technology, Environment and Climate Change Ministry; and Transport Ministry are given an increase of RM1.98 billion, RM1.27 billion, RM353 million, RM310 million and RM52 million respectively.

Besides the PMD, some of the ministries which saw their budgets slashed are Rural Development Ministry by RM960 million; Defence Ministry (RM366 million); and Domestic Trade and Consumer Affairs Ministry (RM115 million).

A total of RM3.32 billion is also allocated for two new ministries, namely the Economic Affairs Ministry and Entrepreneur Development Ministry, which receive RM2.69 billion and RM636 million respectively.