Business

Budget 2019, the first ever budget tabled by the Pakatan Harapan Government, is the biggest federal budget so far with an allocation of US$75.3 billion (RM314.5 billion). It’s also the first budget in a long time to be tabled by a Finance Minister who isn’t also the Prime Minister.

What’s apparent is that the government is in salvage mode. The two hour long budget speech given by Minister of Finance Lim Guan Eng was a clear attempt by the government to bring in as much money as possible to recover the losses caused by the 1Malaysia Development Berhad (1MDB) scandal.

Tellingly themed ‘Credible Malaysia, Dynamic Economy, Prosperous Rakyat,’ Lim started by saying that the government’s debt and liability currently sat at US$255.4 billion (RM1,065 billion), which was US$83.9 billion (RM350 billion) higher than the amount cited by the previous government. He added that despite uncertainties in the global economy, the Pakatan government expected the country’s Gross Domestic Product (GDP) to grow by 4.9% in the coming year.

Lim spent the first 20 minutes taking a dig against the Barisan Nasional (BN) government, eliciting bursts of chaotic shouts and sinister comments from the opposition. He highlighted the fact that the BN administration ‘secretly’ paid off US$1.6 billion (RM7 billion) of the 1MDB debts as of 30 April and added that the current government will need to pay as much as US$10.5 billion (RM43.9 billion) in balance to settle the entire debt. In light of the huge debt faced by the government, Lim then announced that Pakatan would table a Fiscal Responsibility Act by 2021 to monitor and control all the spending done by the government, hopefully a step towards better transparency and greater accountability with regards to government spending.

The financial doom and gloom didn’t end there; Lim said the fiscal deficit in 2018 will reach 3.7% as opposed to 3% in 2017, stressing that the increase was due to expenditure commitments by the previous administration.

The numbers forecasted by Lim were of course a far cry from the previous administration’s, who aimed for a 2.8% fiscal deficit in 2018 as part of the greater plan to achieve a near balanced budget by the year 2020. Lim added that the Pakatan administration was committed to implementing fiscal consolidation steps to reduce the deficit in stages. Lim announced that his government was aiming to reduce it to 3.4% in 2019 followed by 3% and 2.8% in the years 2020 and 2021, respectively.

On a more positive note, the former Penang Chief Minister said the country had international reserves amounting to US$102.1 billion (RM426 billion), which was sufficient to cover 7.4 months of retained imports. He also added that the official federal debt as a percentage of the GDP would reach 51.8% while total liability was expected to lower to 73.5%, a vast contrast to Budget 2018, which was made up of billions of ringgits in ‘goodies’ and was dubbed by many as the ‘election budget’. Budget 2019 appeared a little more practical; some may say it even borders on thrifty. However, it did appear that the appeal of the people for more generous allocations to be given to the health and education sectors were addressed.

The health sector enjoyed its biggest allocation yet, amounting to US$6.9 billion (RM29 billion) which was a US$479 million (RM2 billion) increase from the previous budget. The fact that US$2.6 billion (RM10.9 billion) of that allocation was dedicated to restoring government clinics and hospitals was well received by the general public and medical practitioners nationwide.

As for education, the sector enjoyed the largest piece of the pie with its US$14.4 billion (RM60.2 billion) allocation. Of the allocation, over US$156.3 million (RM652 million) was allocated for the upgrading of schools and education facilities while US$695.2 million (RM2.9 billion) has been allocated to aid poor students in the form of food, school supplies and textbooks. It’s heartening to see the government take further steps in committing to the development of education in the country.

By contrast, in tabling Budget 2016, the previous administration made huge cuts to the two sectors, instead channelling the amount to the Defence Ministry and the Prime Minister’s department. This resulted in them withdrawing scholarships for students and reducing the number of educational programs in schools.

As for the health sector, the previous administration made a 10% cut which resulted in some government hospitals limiting the number of affordable treatments made available to people. Following the tabling of Budget 2016, a public outcry pushed for the then government to increase the allocations for the two sectors in Budget 2017 and Budget 2018. Thrifty though it may be, it appears that Budget 2019 has shifted its focus to become more people-focused more than anything.

Besides allocations, the budget tabled by the Pakatan government reflects the concept of ‘take from the rich and give to the poor’ (let’s nickname it the Robin Hood budget, shall we?). Casinos will be hard hit as the cost for annual casino licencing will increase from US$28.7 million (RM120 million) to US$35.9 million (RM150 million) while the duty paid by casinos will be increased to 35% of its gross income.

Property owners purchasing properties valued at more than RM1 million will also feel a pinch as stamp duty will increase to 4% from the existing 3%. Travellers will also have one less thing to smile about as the government will also impose levies for passengers travelling overseas, ranging from RM20 for ASEAN countries to RM40 for any other international travel.

Based on this announcement alone, it appears that this budget has refreshingly prioritised pragmatism and parity. How it will be implemented and executed is of course yet to be seen, but if it all goes to plan, the nation will be better off for it.

Source: Ministry of Finance, The Star, New Straits Times, Free Malaysia Today