By Shannon Teoh
KUALA LUMPUR, June 20 — The federal government denied today the deficit will rise above six per cent this year, insisting that improved revenue and collections will fund an extra RM15.3 billion it wants to spend.
Deputy Finance Minister Datuk Awang Adek Hussin (picture) tabled today for debate the supplementary supply bill, which has come under swift criticism from the opposition for driving Malaysia deeper into debt despite the Najib administration pledging not to breach a statutory limit of 55 per cent of the economy.
Although the senator admitted the economy was expected to grow by 4-5 per cent, below the Budget 2012 projection of 5-6 per cent, he said “the government has reviewed revenue for the year based on current developments and the trend for revenue collections.”
“It is expected that (the increased revenue) will pay for the additional RM 15.3 billion. This additional amount will not affect the 4.7 per cent deficit projected for 2012 after taking into account the increase in revenue and continued economic growth,” he said.
But Opposition Leader Datuk Seri Anwar Ibrahim immediately disputed the increase in revenue as the first three months of 2012 yielded a growth of just 4.7 per cent, a third consecutive quarterly dip.
“The first quarter is already short of the projection. If this continues, the deficit will be 6.2 per cent,” the Permatang Pauh MP said, noting that this would be higher than the 5.6 and 5.4 per cent recorded in 2010 and last year.
The former finance and deputy prime minister said it was “unacceptable for supplementary supply bills to be tabled as a regular occurrence just months after the Budget.”
“It should only be to overcome crises such as what Japan did last year after the tsunami. This shows the weakness of the government, its economic planning unit, treasury and central bank,” the PKR de facto leader told Parliament.
DAP secretary-general Lim Guan Eng has also described Putrajaya’s spending as irresponsible as the extra expenses would place Malaysia’s Budget deficit at RM59.7 billion, the country’s highest to date.
The Penang chief minister also warned the government would see its debt soar drastically beyond RM500 billion by the end of the year, pushing public debt beyond the statutory ceiling.
But Awang said today the added funds were for “pressing expenditure” including RM7.9 billion in subsidies and RM5.2 billion in civil services wages.
The federal government first presented the supplementary supply bill last week, fuelling fears the government will not be able to rein in the deficit and breach the statutory debt ceiling.
Datuk Seri Najib Razak, who is also finance minister, said late last month the government will ensure that Malaysia’s debt will not exceed the debt limit under the Loan (Local) Act and Government Funding Act due to its prudent management of the nation’s finances.
He said the national debt stood at 53.5 per cent of the GDP, which was RM881 billion in 2011 after a recent revision, leaving Malaysia just RM13 billion shy of the 55 per cent debt limit.
The Najib administration has pledged to cut the fiscal deficit, which dropped to 4.8 per cent of GDP last year from a 22-year high of over seven per cent in 2009 when he took over as prime minister in April.
But Malaysia’s slowing economy has raised questions of whether the federal government can keep spending in check.
Analysts have warned Malaysia to brace for a significant slowdown here due to rising linkages with top trade partners including China, the world’s second largest market which economists say is headed for a sixth consecutive quarterly drop in growth with worse yet to come.
A Greek exit from the euro zone, which is growing threat, would cause a second recession in as little as four years in Malaysia as the knock-on damage to Europe poses a threat to the global economy, Bloomberg reported analysts and economists as saying recently.
The World Bank also urged Malaysia recently to expedite reforms such as subsidy cuts and broadening the tax base, key initiatives that have stalled ahead of an impending federal election, if it wants to achieve Putrajaya’s target of being a high-income economy by 2020.