Tuesday, September 02, 2008

Budget 2009: Skyrocketing Operational Expenditure

The above chart tracks the increase in the Government's
operating expenditure over the past 12 years (in millions)

The budget for 2009 announced last Friday, is once again, a record budget amounting to RM205.9 billion relative to RM176.9 billion which was budgeted for 2008 last year.

While everyone was expecting an expansionary budget in the light of a global economic slowdown, the very substantial increase of 16.4% raises the question of the Government's efficiency and effectiveness especially when the bulk of the increase has gone towards operational expenditure. Operational expenditure includes financial items such as rental, maintenance, emoluments, general supplies and services as well as other items such as compensation to toll concessionaires.

As per the chart above, the Government's operating expenditure has been increasing very rapidly over the past 10 years. It has increased by 189.0% since 2000.

I find it very difficult to fathom why the Government's operating expenditure has to increase by as much as RM53 billion or 52.4% in just 3 years since 2006. It has more than doubled since Datuk Seri Abdullah Ahmad Badawi took over as the prime minister in 2003.

In fact, the proposed Government's operating expenditure in 2009 of RM154.2 billion has exceeded the entire Government's budget expenditure of RM136.8 billion by 12.7% just 3 years ago in 2006.

The Government must put in more effort to rein in operational expenditure which has clearly grown fat and unwieldy and is becoming difficult to maintain. Most importantly, the Government must act firmly to cut down on wastages, corruption and unfair contracts such as expensive repair and maintenance bills for poor quality construction like Middle Ring Road II, purchasing equipment with highly inflated prices as discovered by the Auditor-General as well as lucrative compensations paid to toll concessionaires.

This rapid expansion of operational expenditure has deprived the country of sizeable funds for development expenditure which has greater economic multiplier effects. It has also resulted in a larger than necessary deficit in our budget, which leaves no surplus for our future generation. If this trend were to continue, our economy will be certainly at the risk of collapse in the near future.
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