The budget that was and what it would be

The aim of Budget 2019 was to map out a path to restore the economy, which the govt aims to continue via the SPV 2030


While we are committed towards fiscal consolidation, we will equally prioritise economic growth to improve the socio-economic wellbeing of the rakyat, says Lim

EXPECTATIONS are running high for Budget 2020 which will be tabled by Finance Minister Lim Guan Eng this Friday, and is his second since Pakatan Harapan (PH) took over the government last year.

With strategies that were outlined in Budget 2019 already in place, observers are mainly figuring out if most of the plans are on point or will need further tweaking to ensure that the country’s growth could be achieved at a respectable level.

Last year’s PH government maiden budget, themed “A Resurgent Malaysia, A Dynamic Economy, A Prosperous Society” (Malaysia Wibawa, Ekonomi Dinamik, Rakyat Sejahtera), saw the budget allocating RM314.5 billion.

In his presentation, Lim cautioned that Budget 2019 would be “a sacrificial, belt-tightening budget” as the government had to reduce its RM1 trillion national debt. “To restore our fiscal health, the prime minister has asked Malaysians to be prepared for sacrifices for the nation.

“Therefore, while we are committed towards fiscal consolidation, we will equally prioritise economic growth to improve the socio-economic wellbeing of the rakyat,” he said in his Budget 2019 speech last November.

Budget 2019 saw three focus areas with 12 strategies outlined. The three focus areas were to implement institutional reforms, to ensure the socio-economic wellbeing of Malaysians and to foster an entrepreneurial state.

Nonetheless, the aim of Budget 2019 was to map out a path to restore the Malaysian economy as the Asian Tiger, which the government aims to continue via the Shared Prosperity Vision 2030 (SPV 2030) that was announced last Saturday.

The Malaysian Reserve takes a brief look at last year’s Budget 2019, especially on the development expenditure, and what can be expected in Budget 2020 this Friday.

Budget 2019: A Quick Recap

The PH government adopted zero-based budgeting for Budget 2019 whereby the budget would be planned from the beginning (zero) and allocated accordingly after thorough assessments. In the past, the budget was tweaked from previous year’s reports.

The zero-based budgeting was introduced to avoid providing allocations for items that may have become unnecessary over time, while minimising the practice of “spending for the sake of spending” towards the end of the year to finish up a budget allocation.

A total of RM314.5 billion was allocated for Budget 2019 versus RM290.4 billion in Budget 2018, with 82.61% or RM259.85 billion for operations expenditure and 17.39% or RM54.7 billion for development expenditure.

Lim stated that the development expenditure had increased from RM44.9 billion in 2017 to a projected RM54.9 billion and RM54.7 billion in 2018 and 2019 respectively.

He added that it was due to a reclassification of what was previously classified as operating expenditure to development expenditure amounting to RM6.9 billion and RM9.7 billion in 2018 and 2019 respectively.

“Examples of reclassified items are payments to Prasarana Malaysia Bhd for light rail transit construction and Suria Strategic Energy Resources Sdn Bhd for the gas pipeline projects.

“Previously, the expenditures were treated as transfers under operating expenditure when they were actually development expenditures in nature.

“Other similar expenditures were lease or maintenance payments for the construction of Royal Malaysia Police buildings and refurbishment of schools,” he said.

For development expenditure in Budget 2019, the economic sector received the highest allocation of RM29.2 billion or 53.4% (60.2% in Budget 2018) of RM54.7 billion (RM54.9 billion in Budget 2018), encompassing transport, trade, industry, energy and public utilities, and agriculture.

Meanwhile, the social sector received 27.8% (26.4% in Budget 2018) or RM15.2 billion, the security sector received an allocation of 12.9% (9.7% in Budget 2018) or RM7.1 billion, and the general administration, 5.9% (3.7% in Budget 2018) or RM3.2 billion.

Between the Budgets of 2010 to 2018, around 72% to 83% had been allocated for operations expenditure, while around 16% to 27% were for development expenditure.

Budget 2010 also saw the lowest operations expenditure and highest development expenditure allocated between 2010 and 2018 at 72.22% and 27.78% respectively.

Budget 2020: What to Expect From It

This year’s theme for the national budget is expected to be known as “Shared Prosperity: Sustainable and Inclusive Growth Towards High-income Economy”.

The government is expected to continue prioritising and providing measures in uplifting the society, especially the lower-income households.

There could also be measures to be implemented in Budget 2020 which will focus on developing the economy for mutual prosperity, for the benefit of all.

Meanwhile, digital economy and small and medium enterprises (SMEs) are expected to be among the thrusts in Budget 2020, apart from a “no increase” in taxes, including inheritance tax.

The government might also consider a request from the Negri Sembilan government to set up a free-trade zone in the Malaysia Vision Valley’s new growth area.

Others include the creation of more jobs and aiding of small businesses to overcome unemployment issues among youths.