Budget 2022: The biggest budget with RM332.1b allocation

by ASILA JALIL / graphic by MZUKRI MOHAMAD

THE federal government’s allocation for 2022 expenditure will increase by 3% or RM9.6 billion to RM332.1 billion compared to RM322.5 billion allocated for this year – making it the biggest ever allocation in Malaysia’s history.

According to the government’s 2022 Economic Outlook, the allocation in the 2022 budget will be 20.3% of the total GDP where RM233.5 billion or 70.3% will be channeled to Operating Expenditure (OE), RM75.6 billion (22.8%) for Development Expenditure (DE) and the balance of RM23 billion for the Covid-19 Fund.

The OE allocation for next year will be 14.3% to GDP and is 6.3% higher compared to the government’s 2021revised OE allocation of RM219.6 billion.

Under OE, ministries that will be receiving the highest allocation among others are the Ministry of Health which will account for 33.1% of OE followed by the Ministry of Home Affairs (12.5%) and the Ministry of Education (11.2%).

“A substantial amount of outlays will be for the procurement of medical supplies as well as repairs and maintenance of school facilities,” said the Ministry of Finance in the outlook.

Emoluments, debt service charges and retirement charges remain the top three recipients amounting to 67.5% of the total OE allocation or 9.6% of GDP.

Emoluments for civil servants account for the largest share of OE in 2022 which is estimated to increase to RM86.5 billion partly to cater for the annual salary increment.

A total of RM43.1 billion will be allocated for debt service charges next year while retirement charges are expected to rise to RM28.1 billion due to annual pension increment coupled with a higher number of pensioners and beneficiaries.

Allocation for supplies and services under OE increases by 30.5% to RM30.4 billion attributed to higher outlays for medical supplies as well as an allocation for professional services.

Development Expenditure

As for DE, RM66.9 billion of the total allocation is for 5,575 ongoing projects, while RM8.7 billion is for 1,180 new projects.

The economic sector remains the largest recipient at 53.2% of DE followed by social (30%), security (11.9%) and general administration (4.9%) sectors.

A sum of RM40.2 billion will be earmarked for the enhancement of economic capacity and nation’s competitiveness where focus will be given to transport-related projects, trade and industry as well as energy and public utilities subsectors.

The transport sub sector will be allocated RM15.5 billion to construct, refurbish, and maintain key infrastructures including existing projects like Electrified DOuble Track Gemas-Johor Bahru, Pan Borneo Highway, Rapid Transit System Link as well as the expansion of Kuantan Port, Pahang and Sandakan Airport in Sabah.

The social sector is the second-largest recipient under DE with an allocation of RM22.7 billion. The allocation increases by 30.7% as compared to RM17.3 billion in 2021.

Education and training subsector received the largest allocation amounting to RM12 billion particularly for TVET, research grants and the construction and expansion of educational institutions.

The health subsector will be allocated RM4.5 billion to ensure availability and accessibility of a comprehensive healthcare system.

Revenue collection

Revenue collection for 2022 is estimated to be higher at RM234 billion or 14.3% to GDP, driven by the anticipated increase in tax revenue collection to RM171.4 billion and non-tax revenue collection to RM62.6 billion.

Similarly, total expenditure is budgeted to be slightly higher at RM 332.1 billion or 20.3% to GDP mainly due to higher OE and DE.

“After considering revenue growth and expenditure requirements, the fiscal deficit is expected to moderate to 6% to GDP.

“Similarly, excluding the debt services charges, the primary deficit is estimated at 3.3% of GDP,” it said.

In 2022, petroleum related revenue is forecast to register RM43.9 billion or 18.8% to total revenue, with Petronas dividends accounting for more than half of the total.

Revenue collection for 2021 is projected to be lower at RM221 billion (14.6% to GDP) compared to RM225.1 billion (15.9% to GDP) in 2020.

The 1.8% decline is mainly due to the fall in proceeds from non-tax revenue as a result of lower investment income.

“Direct tax for 2021 is anticipated to turn around by 6.7% to RM120 billion mainly contributed by jigger companies income tax (CITA) collection of RM60.6 billion.

“However, individual income tax is estimated to decline by 6.6% to RM36.4 billion due to fewer taxable individual taxpayers following higher unemployment rate at 4.5%,” it added.

Meanwhile, given the growing fiscal needs, the government has recalibrated its spending priority towards supporting the healthcare system, easing the burden of the rakyat and ensuring business continuity.

Total expenditure for 2021 is expected to remain significant at RM320.6 billion, marginally lower by 0.6% than budget estimates of RM322.5 billion.