Thursday, June 16, 2011

Malaysia 's Government Overspending ???

JUST in the past few days, Malaysians were given a head-scratching example on how taxpayer money was being used.
When it was revealed that RM1.4mil was spent by the Domestic Trade, Co-operatives and Consumerism Ministry on a price comparison website, many argued the price paid to get that website up and running was too high, given its simplistic nature.
Such things have now culminated in the annual reading, and eventually passing of the Supplementary Supply Bill 2011 where the Government will reach into the Consolidated Fund to draw down a further RM13.17bil to add to the budget for 2011.
Under Budget 2011, the Government is planning to spend RM162.8bil as operating expenditure and when adding the extra RM13bil the Government now wants to spend, operating expenditure is forecast to rise to RM176bil.
Under the Bill, an extra RM5.6bil was meant to go toward providing fuel subsidies, which would naturally go up, considering that under Budget 2011 the Government had forecast fuel subsidies to cost RM10bil. But with the price of fuel where it is now, that cost has naturally gone up.
The Bill also saw a number of ministries receive additional allocation ranging from RM5mil to RM1.8bil.
Questions will be asked whether the additional expenditure will lead to a bigger budget deficit, which as of now is forecast to hit 5.4% of gross domestic product this year.
It's not a guarantee that will happen as revenue collection, in years where the economy has been healthy, has been higher than earlier estimated. Revenue collection under Budget 2011 is estimated at RM165.8bil.
The more-than-expected revenue will allow the Government to spend more but the process of taking more money out of the kitty to meet uncounted expenditure is not new and has been going on for years. The problem is that it does not seem to be getting any smaller.
Some have hypothesised that one reason for the additional increase is down to inflation. Costs have gone up and in the current period of higher inflation, what might have been planned earlier might cost more now.
The latest salary increase for teachers might also been a factor in the Supplementary Bill as the Education Ministry, after the Finance Ministry, was the second largest recipient of additional monies amounting to RM1.8bil.
The Government is now looking to rationalise the public service as it too knows that the growth in expenditure caused by the size of the civil service over the years has been tremendous and much of it goes towards paying salaries and pensions.
Should the growth in salaries, pensions and grants not be cut, then the fiscal burden which the Government has endured for more than 10 years will continue to snowball.
Pressure on the need to check expenses also will be greater in a couple of years when Petroliam Nasional Bhd (Petronas) switches its dividend payment to the Government from a flat RM30bil a year to where at least 30% of the company's net profit will be paid as dividend.
This means that should Petronas' annual net profit dip below RM100bil, the dividend the Government will receive will drop. Petronas reported a net profit of RM63bil last financial year.
Worst still, should oil prices retrace significantly back during any future recession, then oil revenue would certainly also fall.

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