Commentary Local

The myth that more money was pumped into Budget 2020

Zaidi Azmi
Written by Zaidi Azmi

October 12, 2019

A commentary by Zaidi Azmi

THE tabling of Budget 2020 by Finance Minister Lim Guan Eng in the Dewan Rakyat  yesterday was a tad amusing.

It was so in the sense that one could see the sheer gusto from Lim, trying to convince Malaysians how well-heeled Budget 2020 was compared to Budget 2019.

For the record, it was not. So how did Lim do it?

Well, in his speech, Lim pointed out that Budget 2020’s total allocation of RM297 billion was an increment of RM19.5 billion compared to Budget 2019’s RM277.5 billion.

And this was rather confusing because the total allocation for Budget 2019 was RM314.5 billion which, when compared with Budget 2020’s, was a decrement of 5.5 per cent.

Overview of Malaysia’s budget 2019 and 2020

Category

2019

2020

Percentage difference

Total allocation

RM314.5 billion

RM297 billion

5.5

Revenue collection

RM261.8 billion

RM244.5 billion

6.6

Fiscal deficit

3.4 per cent

3.2 per cent

 

Operating expenditure

Total allocation

RM259.8 billion

RM241 billion

7.2

Development expenditure

Total allocation

RM54.7 billion

RM56 billion

2.3

So where did the contentious RM277.5 billion figure comes from?

Well, apparently, Lim had conveniently deducted the RM37 billion one-off allocation borne from GST and Income Tax refunds and Petronas’ money that make up Budget 2019’s RM314.5 billion total allocation.

In case you’re not following; RM314.5 billion – RM37 billion = RM277.5 billion, which was the figure Lim had cherry-picked in crafting his ‘Budget 2020 is better than Budget 2019’ narrative.

Gosh. Did Lim just take creative accounting to a whole new level?

Why he needed to specifically exclude the RM37 billion from Budget 2019 without even mentioning the latter’s total allocation of RM314.5 billion in his speech however, was a no brainer.

“It is to make it look like there is a positive increment. So Budget 2019 is an outlier,” posited Dr Ahmed Razman Abdul Latif of Universiti Putra Malaysia’s Putra Business School.

But total allocation was not the only thing that was reduced in next year’s budget. The government had also cut down next year’s expected revenue collection by 6.6 per cent compared to this year’s.

And according to Razman such a reduction will make it harder for the government to achieve a zero fiscal budget which was proven by Budget 2020’s fiscal deficit target of 3.2 per cent instead of 3 per cent.

“In addition the committed expenses such as emolument and federal debt obligation will continue to rise, on top of government commitment to maintain developing expenditure at the same level as before.

“The net effect of this will be increasing federal debt in relation to GDP. The reason why this is happening is that the government is banking on higher productivity which will generate higher revenue than estimated,” said Razman.

The operating expenditure for Budget 2020 was also reduced by 7.2 per cent compared to Budget 2019’s but to simply regard such a decrement as a bad is, according to independent economist Professor Hoo Ke Ping, rather inaccurate.

“It is both bad and good. Cutting excess consumption is a good thing. But the government had also cut down fuel subsidy (which is a part of operating expenditure) which will burden the people, especially those of the M40 (what Malaysia calls its middle-income group),” said Hoo.

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About the author

Zaidi Azmi

Zaidi Azmi

If Zaidi Azmi isn’t busy finding his way in the city, this 26-year-old northern kampung boy can be found struggling to make sense of the Malaysian political scene. Zaidi can be reached at zaidiazmi91@gmail.com.