Fiscal deficit down 39% to RM21.4b in January–May

Posted on 25 July 2019

Source: The Edge

Open competitive tenders and zero-based budgeting have had a positive impact on the government’s finances, leading to a 13% or RM2.4 billion year-on-year (y-o-y) increase in development expenditure for the January-May period, said Finance Minister Lim Guan Eng.

In a statement yesterday, Guan Eng said that for the first five months of 2019, the government had successfully cut its fiscal deficit by 39% to RM21.4 billion, down from the RM35 billion deficit recorded in the same period last year.

“Nevertheless, the government is mindful of its subsidy bill, and will continue to manage its expenses prudently.

“Additionally, the government has shrunk its current account deficit to RM1.1 billion in January-May 2019, a reduction of 94% or RM16 billion, from a large RM17.1 billion deficit in the same period last year,” he said.

Guan Eng said for the January-May period, government revenue stood at RM105.4 billion versus RM92.7 billion a year earlier, while operating expenditure fell RM3.3 billion to RM106.6 billion from RM109.9 billion previously.

He said the successful fiscal consolidation was among the reasons for Fitch Ratings’ affirmation of Malaysia’s sovereign credit rating at A- with a stable outlook on July 18, which followed a similar confirmation by S&P Global Ratings on July 3.

Guan Eng said fiscal discipline has been instituted through a combination of tighter controls over operating expenditure in the form of wider application of open competitive tender and implementation of zero-based budgeting.

“Further, revenue and spending measures as outlined in Budget 2019 have enabled the government to improve its financial health.

“As stated in the Budget 2019 documents, the government plans to spend RM259.9 billion for operational purposes this year.

“The RM106.5 billion worth of operational spending made in [the] January-May 2019 period represents 41% of total budgeted 2019 operating expenditure,” he said.

The finance minister said based on the current fiscal performance, the government is positive of achieving its fiscal deficit target of 3.4% of gross domestic product (GDP), while keeping its 2019 current account balance in surplus.

“If there is no trade war between China and the United States, two of Malaysia’s largest trade partners, the government would even be confident of achieving the targeted 3% of GDP fiscal deficit for 2020,” he said.

Guan Eng added that approved foreign direct investment (FDI) across all sectors for the first quarter of 2019 rose 73.4% to RM29.3 billion versus RM16.9 billion a year ago.

He said approved FDI growth during the quarter was driven by a 127% increase in approved manufacturing FDI to RM20.2 billion from RM8.9 billion a year ago.

“Vehicle sales for the first five months of 2019 have improved by 13% compared [with] the same period a year ago.

“Meanwhile, unemployment rate for May 2019 dropped to 3.3%, from 3.4% in April 2019.

“The government is on track to fully restore its fiscal health by 2021,” he said.

Guan Eng said with the rakyat’s support, Malaysia has good prospects to overcome the financial legacy issues of high debt load and failed governance left behind by the previous administration. 

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