MP SPEAKS Over the past few years, the government has been able to increase its budget tremendously to achieve record expenditures annually.
has allowed the government to prop up the economy as we face challenges
in attracting private investments, as well as a drop in our trade
However, Budget 2013 has projected an increase of
only 0.7 percent (2012: 11.8 percent; 2011: 16.1 percent) in projected
revenues from RM207.2 billion to RM208.6 billion in 2013.
This is the slowest projected increase in the tabled budget since 1999, barring the global financial crisis in 2009.
the government is forced to table a smaller budget than the prior year.
The proposed operating expenditure has been reduced by 0.3 percent from
RM202.6 billion to RM201.9 billion, while the development expenditure
is also reduced from RM46.9 billion to RM46.7 billion or 0.4 percent.
marked decline in revenue growth will have a very significant impact on
the government's ability to impact growth in the Malaysian economy
through fiscal means.
The fact that we have not been able to
reduce our budget deficit below four percent over the past few years
reflects the years of wasted opportunities, where we have failed to curb
our expenditure through reduced wastage, abuses and corruption.
Consistent decline in development expenditure
concern is also how the government has consistently reduced its
emphasis on Development Expenditure, which will create greater
multiplier effects on our economy.
The proportion of the budget
expenditure dedicated to Development Expenditure has reduced from 31.5
percent in 2003 to 27.1 percent in 2007 to 21.3 percent in 2012. The
worrying trend continues in 2013 where the proportion is reduced further
to only 18.6 percent, a record low in Malaysia's history.
represents lower investment by the government with its current revenue,
which will result only in lower returns to the economy in the years
Our federal government debt
has increased rapidly from RM242 billion in 2004 to RM363 billion in
2009 and to RM456 billion in 2011. For 2012, it is projected that our
debt will hit RM502 billion. That represents a marked 107.4 percent
increase in debt over the past eight years.
More worryingly, the debts have increased our structural debt service commitments significantly.
rate at which our debt servicing commitments are growing will severely
constrict our future operational and development expenditure. This,
together with a much slower rate of growth in government revenue, as
shown in Budget 2013, will have a major impact on our economy, given its
current heavy reliance on public spending and investments.
2003 to 2008, our debt servicing obligations increased by 21.9 percent
from RM10.5 billion to RM12.8 billion. However, in the next five years
from 2008 to 2013, the annual commitment has increased by a whopping
Federal debt will increase
official federal government debt is also expected to increase as a
proportion of our GDP from 51.8 percent to 53.7 percent, staying
marginally below the 55 percent legal federal government debt limit.
even the 53.7 percent is an artificial figure as it fails to take into
consideration the government's contingent liabilities and hidden debts,
which amounted to RM117 billion as at December 2011.
frightening is the government's contingent liability is expected to
increase exponentially in 2013 due to the expenditure on the RM53
billion MRT project as well as other mega-infrastructure projects.
debt-driven expenses are completely off the balance sheet or not
considered part of the official federal government debt, despite it
ultimately being funded by the federal government.
Spain, which is facing a major financial crisis that requires hundreds
of billions of euro bailout, has an "official" debt to GDP ratio of 68.5
percent. But due to various contingent liability and bank bailouts, the
"real" ratio, which is significantly higher, has caused a near collapse
of its economy in a crisis that is still evolving.
We must not allow ourselves to get entangled in a similar crisis.
No political will
on the Economic Report, the government was able to keep its deficit
below five percent at 4.7 percent for 2012 only because of an unbudgeted
increase in revenue by RM21 billion for the year. If not for the above,
based on the government's expenditure in 2012, our deficit would have
increased to 6.7 percent.
The government has announced its plan
in Budget 2013 to keep the deficit at four percent. However, it has
become clear that the government's original target as late as 2011 to
reduce our deficit to 2.5 percent by 2015 is no longer achievable.
The steep decline of growth in the government's revenue will make the task seemingly impossible.
budget demonstrates no political will on the part of the federal
government to make the necessary structural changes to the way we manage
our budget. We see a decline in the proportion of funds spent on
development expenditure. We also do not see a serious effort to tackle
federal government debt, both "official" and "hidden".
2013 reads like a repeat of budgets in the previous years, using the
same formula without taking into consideration the changing
circumstances and the increasing economic challenges we face today.
TONY PUA is the MP for Petaling Jaya Utara
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