Do you know what is the TOTAL budget deficit on top of Msia Govt deficit of 4.5%?..scary. .read more

ISIS economist: Malaysia overall budget deficit hits 10.5% in 2012

Business & Markets 2012 Written by Kamarul Azhar of theedgemalaysia.com Thursday, 04 October 2012 15:55

KUALA LUMPUR (Oct 4): Malaysia’s public sector-wide budget deficit is at a whopping 10.5% this year, which includes the federal government’s budget deficit of 4.5% and the debts accumulated by the non-financial public enterprises (NFPEs), according to an economist with the Institute of Strategic and International Studies (ISIS).

Speaking at the PwC Budget Seminar 2013 on Thursday, Steven Wong, senior director of economics at ISIS, said debts raised by NFPEs are actually the ones contributing to the sharp growth of Federal government’s debts.

NFPEs are those companies such as but not limited to TENAGA NASIONAL BHD [] (TNB), Petroliam Nasional Bhd and TELEKOM MALAYSIA BHD [], of which the federal government is the largest shareholder.

“You have the 4.5% deficit of the federal government budget, and you have the 10.5% deficit public sector-wide, and this is largely the contribution of the non-financial public enterprises. These enterprises are actually borrowing, and these debts are so much dependent on government’s revenues.

“This is why you see the debt is growing much faster. You can have negative, you can actually have squeezed federal government’s expenditure, but the debts will still grow because they are coming from non-financial public enterprises,” he said.

According to Wong, NFPE’s development expenditure in 2011 is at RM50 billion, which is higher than the federal government’s entire development expenditure. By end-December 2012, that amount would grow to RM113 billion, he added.

“In 2013, the government is projecting for this figure to come down a little but it will still remain at RM100 billion. So where is the economic growth, activity going to be? The activity is going to be at the NFPE side. We will live by the performance of the NFPE,” Wong said.

Commenting on the budget tabled by Prime Minister Datuk Seri Najib Razak in the Dewan Rakyat on Sept 28, Wong said the budget is expected to be mildly expansionary, because the federal government could not afford to continue on a spending and borrowing binge as it did in the last two years.

He said between 2011 and 2012, there has been a massive increase of federal government’s expenditure, to the tune of about RM20 billion. However, most of these spending are allocated mostly to emoluments and debt service charge expenditure, he said.

Public sector emoluments or RM58.6 billion makes up 29.2% of the federal government’s operating expenditure in Budget 2013.

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