Saturday, October 16, 2010

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%.


Anonymous said...

By the way, I have understood that any additional bills or fundings would have to be improved. I believe you guys must have followed thoroughly. The question would be that we must question BN to table the bill first before spending. I believe Kula has exasperated in the parliament that it's a academic exercise. Perhaps, Penang & Selangor state government can demonstrate this to show fiscal responsibilities

Lee Wee Tak said...

oh was this part of Najib's speech then?

budget overrun will cost some people their jobs in commercial entities

budget overlike without explanation amounts to cheating the rakyat when making budget speech

the overrun perhaps is due to the spending spluge in the by-election plus the pay out for expected GE13?

if the BN-UMNO administration is spending more than it promises to spend, I do not see any unexpected and pleasant benefit at alll trickling to rakyat

Lee Wee Tak said...

Dear Tony,

some thoughts to share with you here:

the worst overspend years are 2004 11.3 bil/14.1%; 2008 22.2 bil/17.2%; 13.9 bil 10/1% with total budget increasing from 80 in 2004 to 129 in 2008 and then 138 in 2010

for 2004 and 2008 are election years while 2009 is buy election normally in vote buying season, budget will overrun

the smallest overrun of 3.9% was achieve in 2009; only because it had the biggest budget for them all154.2; triple the size of the hell did we need 3 times the budget to run a gomen compared to less than 10 years wages did not increase 3 times from 2000 to 2009

remember,Najib promised to cut deficit in 2010 budget speech and yet, he spent 152 bil i.e. about the same as the biggest budget for the past 10 years, i,e, 154.2 of 2009 budget

the question is why in 2009 there was a huge budget? is it for sloganeering for new PM, and also to pay off the out going PM who incurred the biggest election loses in BN history (and probably did not lost too much sleep over it)

Anonymous said...

where can we get d breakdown for revenue earned? would the increase in revenue resulted from additional taxes imposed latelt? if so, that shld nt be regarded as 'increase' in revenue.

Anonymous said...

YB Tony, I think it's time you guys in PR stand up to save the country from stairways to hell...what nonsense is that if other country have it we must have it even bigger!What can the babel tower benefit working class and poor lesser beings like us except those few already super rich well-connected tycoons who will get the job.If RM5 billion must be given to these selected tycoons nomatter what,may I suggest give to them to ask them clean up all the 50 years choked drains all over the country which is breeding aedes like a factory plus clean up all those embarrasing dirty toilets nationwide.At least this will benefit ALL the rakyat and the nation's image as well as many many small time contractors nationwide.

Unknown said...

entrepreneur able to come out a solution to CUT MANUFACTURING COST.. but Government always come out with the idea "HOW TO SPEND MORE"? find more lubang to earn extra $$