PM Anwar tables record RM393.8 billion budget...

PM Anwar tables record RM393.8 billion budget....

Prime Minister Anwar Ibrahim on Friday (Oct 13) tabled the country’s largest-ever budget, as he made a further push for a shift from the current blanket subsidies to a more targeted approach aimed at giving more to the truly needy.

Among the measures announced included an increase to the Sales and Services Tax (SST) from six per cent to eight per cent, though it will not include food and beverages or telecommunications.

A capital gains tax on unlisted shares will also be introduced at a rate of 10 per cent from March 1 next year. Separately, a high-value goods tax of five to 10 per cent on items such as jewellery and watches will also be introduced, he said.

The expansionary 2024 budget of RM393.8 billion (US$83.29 billion) surpasses the RM388.1 billion unveiled for the 2023 budget in February this year, the largest then. The 2024 budget, which was keenly anticipated as the first under Mr Anwar to bear his imprint since he took office in November last year, marks a return to the regular year-end budget announcement cycle.

Mr Anwar, who is also the country’s finance minister, announced that RM303.8 billion - about 77 per cent of the RM393.8 billion budget next year - will be allocated for operating expenditure while RM90 billion is for development expenditure. In his speech, Mr Anwar stressed that only by reducing the country’s deficit and liabilities that the government is able to restore its sustainable fiscal position.

Targeting the subsidies...

Mr Anwar also took aim at Malaysia’s broad subsidies, saying that such subsidies have benefited the rich. “Economic policy should be directed towards economic growth and equality. However, what has happened is that the amount of subsidies (given out) has benefited the rich.

“It is hoped that by improving and plugging the leakages in the subsidy system, that the proceeds could be passed on to the public, including wage increments for the working class,” said Mr Anwar.

He added that the targeted approach to the subsidies will begin next year.“Thus, from next year, a targeted approach to the subsidies will be implemented in phases.

"If it is true that we can save on the subsidy spending, then I guarantee that God willing we will increase the allocation of cash assistance through the Rahmah Cash Contribution (Sumbangan Tunai Rahmah) from the current RM8 billion to RM10 billion for almost 9 million residents,” said Mr Anwar, who noted that subsidy cuts are largely on fuel and electricity.

Diesel subsidies, will however, still be enjoyed by certain groups of consumers, such as logistics companies, he said. “With this approach, this will reduce subsidy leakages, and at the same time, reduce the impact on the price of daily goods for the people.”

The targeted approach to electricity subsidies implemented this year - where subsidies for the top 10 per cent of those with the highest electricity consumption was released - has allowed the government to save more than RM4.6 billion, said Mr Anwar.

Chicken & Eggs...

Mr Anwar also said that the government will be waiving the temporary price ceiling that has been imposed on the sale of chickens and eggs, noting that the supply of the goods has thus far stabilised in the country.

On Feb 5 last year, Malaysia introduced a price ceiling on chickens and eggs to prevent price hikes caused by a supply shortage of the products. The price of chickens at the time skyrocketed due to the costs of breeding them, as the price of chicken feed, which is imported, increased month by month.

Among a slew of other announcements, Mr Anwar said that there will be a Malaysia Visa Liberalisation Plan that includes a relaxation of conditions for the Malaysia My Second Home (MM2H) programme, though he did not elaborate. The MM2H programme, introduced in 2002, is a long-term visa scheme for foreigners to purchase property and reside in Malaysia.

On the electric vehicles (EV) industry front, Mr Anwar said that the Malaysian government welcomed investments worth RM170 million from established companies to build 180 EV charging stations in the country. There will also be an EV motorcycle scheme with rebates of up to RM2,400 for the buyer - applicable to those who earn RM120,000 and below.

And on the transportation infrastructure front, Mr Anwar announced that a project to widen the North-South Expressway in Johor will come at a cost of RM931 million. Mr Anwar also announced 33 high-priority flood mitigation projects across various states in the country at a cost of RM11.8 billion.

Earlier this year, after visiting a flood relief centre in Johor, Mr Anwar said: “If we don’t do anything serious to address this (flood) issue, it will happen again. This is not the first time, and it has been going on for years and sometimes twice a year.”

Mr Anwar said that this year’s budget - themed “Reformasi Ekonomi, Memperkasa Rakyat” or “Economic Reform, Empowering the People” - is a reflection of the unity government’s determination to uplift the national economy and the people’s well-being.

He added that the unity government was confident of reaching its 2024 economic growth target of close to 5 per cent. According to the Malaysian finance ministry’s economic outlook report made available on Friday, the country’s economy is expected to grow just 4.0 per cent this year. Against the backdrop of a lacklustre global economic recovery, analysts have predicted that the budget for the coming year would include “feel-good measures”, according to the New Straits Times.

Economists were also expecting Mr Anwar to announce steps to implement the capital gains and luxury taxes proposed in the previous budget in order to broaden the revenue base, with some predicting an introduction of the Goods & Services Tax (GST) from late 2024 or early 2025, Reuters reported.

Mr Anwar was also expected to announce details on subsidy rationalisation to better help those in the lower-income group. He had earlier told CNA in an interview that the current subsidy programme that ran up to US$17 billion last year is plagued by leakage and wastage and is not sustainable.

Malaysia, with a debt of RM1.399 trillion at the end of 2022, saw its economic growth in the second quarter hit the lowest in nearly two years. The World Bank also recently revised Malaysia’s economic growth from 4.3 per cent to 3.9 per cent, sparking worries among economists that this will bode poorly for the local economy, according to local media.

In a bid to strengthen Malaysia’s economy, Mr Anwar has introduced economic plans like the Madani Economy Framework - which involves the comprehensive restructuring of the Malaysian economy - and the New Industrial Master Plan (NIMP) which seeks to increase the manufacturing sector's value.

Mr Anwar, who began his budget speech on Friday at 4pm, wrapped it up under three hours. The budget statement will be debated at the policy level for eight days starting Oct 16, followed then by responses from the relevant ministries from Oct 30. - CNA