Friday, October 30, 2009

Budget 2010: General Elections 2011?

Regular readers would have noted my constant laments on the BN Governments sky-high operating expenditures over the past decade, and especially in the last 5-6 years.

Hence as the government coffers ran out of money, in part due to having spent every cent of our billions of windfall revenues from the oil and gas sector over the past few years, and in part due to falling oil prices which affects the current government tax collections, it was not a surprise that in the Budget 2010, operational expenditure has been cut by 13.7% from RM160 billion to RM138 billion.

While it was certainly not a "willing" cut in operational expenditure, it is still a welcome cut as our government's operational expenditure had been spiralling out of control.

However, it was still interesting to note that while almost every line item within the Operational Expenditure allocations were cut, 2 related items - "emoluments" and "pensions" - increased significantly.

Operational expenditure classified under "Others" which is essentially discretionary spending by the Prime Minister's Department, has been cut from RM31 billion to RM11 billion. "Supplies and Services" was cut by 22.2% from RM26.8 billion to RM20.8 billion. "Subsidies" were cut by 14.7% from RM24.5 billion to RM20.9 billion.

However, "Emoluments", the largest single component of our operational expenditure, increased from RM38.0 billion to RM42.2 billion, an increase of 11% or RM4.2 billion. Similarly, pensions and gratuities increased from RM13.5 billion to RM15.9 billion, an increase of RM2.5 billion or 17.9%. This sizeable increase in emoluments and pensions is certainly out of the ordinary, and certainly not related to organic pay increments.

I've often criticised the size of the civil service, and its ratio to the population being one of the highest in the world. Hence the sizeable increase in allocation for emoluments and pensions has got to do with either:
  • a. The Government intends to drastically expand the already bloated civil service further, which in my opinion is very unlikely, especially with the registered intent to increase privatisation initiatives... (but then again... ;-)), OR

  • b. The Government has budgeted for a sizeable bonus to be announced and paid towards the end of 2010.
Now, why would there be such a big bonus at the end of 2010? You've got it. It will be in preparation for the elections to be called in 2011, probably in the 2nd quarter, not long after the 3 year anniversary of March 2008 tsunamic elections.

I questioned this in parliament during my Budget speech, and the New Straits Times picked it up ;-)
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