Budget 2010: Government Failed To Keep Lid on Expenses

The Prime Minister in his speech announced that the Government will be on track to meet the projected budget deficit of 5.6% for the fiscal year 2010 giving the appearance that the Government was able to meet its financial commitment and targets. However, the meeting of the deficit target masks the fact that the Government had in fact substantially overspent its allocated budgets, and was “saved” only by a higher than expected collection of tax revenues.

Last year when the budget for 2010 was announced, the Government promised a commitment to trim operating expenditure to reduce wastage and to generate greater value for money returns with the tax-payers' money.

We had in fact applauded the Government's decision to reduce operating expenditure by a significant 13.7% from RM160.2 billion in 2009 to a budgeted RM138.3 billion. The government's operating expenditure includes salaries and pensions for the civil service, purchase of government assets, supplies and services, rentals, various subsidies, debt repayments, toll compensations and “other” expenditures. A government's “operating expenditure” is not expected to generate high economic multiplier effects, as opposed to “development expenditure”.

However, in the Budget announcement today, it has been announced that the Government's operating expenditure is expected to hit RM152.2 billion, or a massive RM13.9 billion (10.1%) over budget.

This clearly demonstrates the government's inability to impose financial discipline on its expenditure to ensure that the country's financial objectives are met. It is also not the first year the Government has overspent its budget. In fact, the Government has consistently overspent its budget by at least 5% as far back as 2000, with the worst year being in 2008 when the budget was exceeded by 17.2%. This is shown in the table below.

Table 1: Government Operating Expenditure – Budget v Actual (RM billions)

Comparatively, the Government's development expenditure only exceeded it's budget RM51.2 billion by RM2.9 billion, which is acceptable on the basis that the economy had required additional stimulus spending.

Therefore, Datuk Seri Najib Abdul Razak, who is both the Finance and Prime Minister must explain the cause of the continuing and possibly worsening financial indiscipline. The increasingly endemic financial ill-discipline in government departments must be halted to ensure that every cent of the rakyat's money is properly expended in accordance to approved and budgeted limits.

Otherwise, the complete lack of regard to the annual approved budget in parliament over the past 10 years have rendered the budget debate nearly meaningless as whatever allocations approved by the Parliament gets completely ignored, and the actual expenditures are significantly different from the one approved. Datuk Seri Najib Abdul Razak must also at the same time announce specific steps to be taken which will rein in the reckless disregard by the Government departments to ensure that the targets and objectives of the Budget are met, instead of just relying on the age-old rhetoric like “unlocking the real value of government assets” and ““value for money” in its spending without any follow up concrete actions.

Hence, we are fortunate that in 2010, our actual revenues to be collected, RM162.1 billion is significantly higher than the expected RM148.4 billion, or our deficit would have worsened substantially than the projected 5.6%.