Sunday, October 17, 2010

Budget 2011: Operating Expenditure Explodes Again

Budget 2011: Disproportionate increase in operating expenditure and a reduction in development expenditure fails to give confidence that Budget 2011 will be able to stimulate the necessary growth to meet our high-income nation objective.

Prior to the announcement of the Budget 2011, the Prime Minister has announced a whole series of measures and projects under the Government (GTP) and Economic Transformation Programmes (ETP) which are designed to take Malaysia to meet our high-income nation objectives by 2020.

It is hence a surprise that in the Budget 2011, the Government has once again fallen back to the same budget formula employed by the former premier Tun Abdullah Ahmad Badawi which had resulted in a budget crisis in 2009/2010 where the deficit hit a high of 7.4% which had required the Government to impose a series of belt-tightening measures to reduce expenditure.

Instead of increasing the allocation for “development expenditure” to invest in the various critical projects under the National Key Result Areas (NKRA), GTP and ETP, it has been reduced by approximately RM5 billion (9.0%) from RM54.0 billion in 2010 to RM49.2 billion for 2011.

On the other hand, the “operating expenditure” of the Government is budgeted to increase by a massive RM10.6 billion or 7% from RM152.2 billion in 2010 to RM162.8 billion. This has yet to take into account the fact that the original operating expenditure for 2010 was only RM138.3 billion. If this original budget figure is used as the benchmark, the 2011 budget for operating expenditure will increase by massive 17.7% or RM24.5 billion.

The question arises as to why does the Government need to increase its operating expenditure by such a large amount when just not too long ago in 2004, the Government's operating budget was only RM80 billion or less than half the budgeted amount for 2011?

When the expenditure for operating expenditure is analysed further, the category of expenditure which is budgeted to increase the most is for “supplies and services”. This will increase from the budgeted RM20.8 billion for 2010 to RM28.2 billion for 2011 or a 35.6%. This “supplies and services” expenditure is also the 2nd largest category at 17.3% of the total operating expenditure.

At the same time, the budget for emoluments remain the largest component of operating expenditure at 28.0% or RM45.6 billion. This figure is also a RM3.4 billion increase from RM42.2 billion budgeted for 2010.

More worryingly, the ratio of operating expenditure to development has continued to increase despite the fact that the budget for 2011 is our highest ever at RM211.9 billion which signals the fact that we are not allocating our resources to the most productive use. Instead of declining, the proportion of budget used for operating expenditure has increased from a low of 68.5% in 2003 to a record high of 76.8% budget for next year, despite a total increase in total expenditure from RM104.7 billion to RM211.9 billion. This is shown in the table below:

Table 2: Government Operating v Development Expenditure (RM billions)

Hence, we call upon the Prime Minister to explain why these worrying trends have not been addressed in the upcoming budget debate.

In order to ensure that Government expenditure is effectively utilised and is best able to generate the high economic multiplier impact for the country, the Government must ensure that its operating expenditure is restrained while the focus must be on development expenditure on projects which will bring high economic benefit for Malaysians throughout the country.


Unknown said...

This trend will ensure and lead Malaysia towards bankruptcy on schedule announced by Idris Jala.

PJU Voter said...


GOSH!!! What a load of RUBBISH you had written.

You might as well take that BULLET which was presented to you in the mail & go BUY yaself a REAL GUN.

Next, load the BULLET & SHOOT it right into your 1 DUMB HEAD.

Man!!! Did you do a read proof on this piece of article??? Totally makes no sense on what you're talking about.

Unknown said...

Hi PJU Voter,

if you disagree, point it out. Don't just blackmail.

pearl said...

@PJU Voter,

what about you? don't you just writing rubbish and shit yourself?

HAHA said...

LOL!Either PJU voter cant read plain english, or PJU voter wants to cheaper lingerie & diapers.. ;)

Anonymous said...

Dear Tony,

You did the right thing in not responding to PJU Voter. Without civic-mindedness & decency in language, not worth our energy and attention.

I appreciate your comments on following :

1. On MRT: Gamuda offered to complete the project for RM36 billion. Why the Budget allocated RM40billion?

2. On MRT: Does it take 10 long years to complete? I understand Beijing Authorities installed 6 new MRT lines in less than 4 years.

3. On deficit at 5.4%, very low stimulus effect. with foreign reserves exceeding RM300billion, the amount is insufficient to attract foreign talents. Why is the government so conservative? Would you too?

Thank you.

PS: Miss out on Mr Teh Chi Chang's contribution. Hope he is good with family.

Voice of Reason said...

Its actually quite shocking how this has increased and drastically from the looks of it.
All the talk of pulling back the deficit will come to naught if operating expenditure is not cut back.
Furthermore, why does the size of government have to grow so much? Do we really need so many ministries?

Anonymous said...

Dear YB,

Please use the facebook page - 1M Malaysian reject 100 storey tower - the knock some senses to the government on this issue. We are behind u to object that tower!

Thank you.

Concern Citizen

Anonymous said...

yes, i agree with this article...Malaysia government spend a lot of unnecessary items and allocate the incompletely make no sense such as Permata which for his just wasting money and gain popularity from public. Nowadays, purchasing power of the public reduced as well.