Prime Minister Datuk Seri Najib Razak today announced a slew of budget cuts amounting to RM5.5 billion as part of Putrajaya’s “proactive measures” to align itself with plunging global oil prices and revised world economic growth projections.
The cuts would come from the Budget 2015’s operational expenditures that were initially set at RM223.4 billion, while the RM48.5 billion for development would remain untouched, Najib said in his speech today at the Putrajaya International Convention Centre.
Also, the fiscal deficit target of 3% of the Gross Domestic Product (GDP) for the year has been revised to 3.2%.
Najib said this was still lower than 2014’s fiscal deficit of 3.5%. The “proactive measures” to achieve the RM5.5 billion savings are:
“(The government will) optimise outlays on supplies and services, especially overseas travel, events and functions and use of professional services. This will result in savings of RM1.6 billion.
“Second, defer the 2015 Program Latihan Khidmat Negara (National Service) to enable the programme to be reviewed and enhanced, with savings expected at RM400 million.
“Third, review transfers and grants to statutory bodies, GLCs, Government Trust Funds, particularly those with a steady revenue stream and high reserves. This measure will result in savings of RM3.2 billion.
“Fourth, reschedule the purchase of non-critical assets, especially office equipment, software and vehicles, with an expected savings of RM300 million.”
Najib said Putrajaya’s revenue would be enhanced by encouraging companies to register with the Royal Malaysian Customs to enable them to charge and collect the goods and services tax (GST).
He estimated that broadening the tax base would contribute an additional RM1 billion.
Putrajaya would also realise additional dividends from GLCs and GLICs as well as other government entities amounting to RM400 million, said Najib.
He added that the revisions to the budget were necessary as Putrajaya would otherwise face a revenue shortfall of RM8.3 billion due to falling crude oil prices, despite savings of RM10.7 billion after doing away with fuel subsidies.
“Without any fiscal measures, the deficit will increase to 3.9% of GDP against the target of 4% for 2015.
“This requires the government to take measures to reduce the deficit, in line with the government’s commitment towards fiscal consolidation.”
Najib said the GDP growth target between 5% and 6% had been revised to between 4.5% to 5.5%.
To ensure economic growth remained strong, he said Putrajaya would boost exports of goods and services, enhance private consumption, and accelerate private investment.
Among its strategies are postponing the scheduled electricity tariff and gas price hike, and increasing nationwide mega sales.
Meanwhile, Najib announced an initial allocation of RM800 million for the repair and construction of basic infrastructures affected by the recent floods, and another RM893 million for flood mitigation projects.
These included building eight-foot high stilt houses for those who have land and whose homes were damaged by the floods, and handing over 1,000 units of low-cost homes in Gua Musang, Kelantan.
As he concluded his speech, he told Malaysians the country was not in a financial crisis or recession, but simply taking pre-emptive measures.
“We are neither in recession nor a crisis as experienced in 1997, 1998 and 2009, which warranted stimulus packages.
“The strategies announced by the government are proactive initiatives to make the necessary adjustments following the challenging external developments which are beyond our control.
“This is a reality check following, among others, declining global crude oil prices,” he added. – January 20, 2015.
By ANISAH SHUKRY The Malaysian Insider
Focus on Malaysian-manufactured goods
PETALING JAYA: The impact of the reduction in global oil prices from US$100 to US$40 per barrel can be offset by a rise in demand for Malaysian-manufactured goods, said Prime Minister Datuk Seri Najib Tun Razak (pic) on Tuesday.
Najib, who announced revisions to the 2015 Budget which was tabled in October 2014, said that this could be done as crude oil only makes up 4.5% of the nation’s total exports.
“The reduction in the price of crude oil will indirectly increase demand in Malaysia-made products. We will actively promote ‘import-substitution’ to reduce our dependency on external sources to obtain goods and services,” said Najib.
He added that the Government initiatives would be created to increase the use of the private sector.
“We will give priority to local Class G1 (Class F), G2 (Class E) and G3 (Class D) contractors registered with the Construction Industry Development Board to carry out recovery works in their local areas affected by the east coast flood,” said Najib.
He added that the Government would intensify promotions encouraging the public to buy made-in-Malaysia products.
“We will increase the frequency and duration of mega sales throughout the nation, and intensify domestic tourism promotions by offering competitive airfares,” said Najib.
He also said that the Government would encourage the private sector to reap opportunities created by the Asean Economic Community.
“We will also intensify programmes to boost exports of Malaysian goods in 46 nations across Asia, Europe, the Middle East and America,” said Najib.
In his speech, Najib said the adjustment to the 2015 Budget was necessary to “ensure our economy continues to attain respectable and reasonable growth, and development for the nation and rakyat continues” as the 2015 Budget was based on the price of crude oil remaining at US$100 per barrel.
“Based on a crude oil price of US$100 per barrel and taking government saving measures and retail price controls into account, the Government was expected to have a fiscal profit of RM3.7bil. However, with the current price of oil at US$55 a barrel, the government will lose RM13.8bil in income,” said Najib.
By Tan Ti Liang The Star/Asia News Network