First published in theSun on 26 October 2017 here.
THE prime minister presents the budget each year in Parliament with great fanfare. Although the speech – and its accompanying budget documents – does lay out a roadmap of what the country’s financial plans are for the following year, the information provided therein is simply insufficient for researchers and citizens to have a complete and accurate picture of the state of the nation’s economy.
There are several reasons why this annual presentation provides only half the story.
First, the budget tabled in October of every year is usually not the only amount of funds the government injects into the economy for the following year. The practice in Malaysia has been to table a supplementary budget of a substantial figure, bringing up the total expenditure of any given year to a greater amount.
For instance, while the originally tabled 2016 budget was RM267.2 billion, there was a supplementary budget passed in March 2017 to seek an additional allocation of RM3.08 billion for 2016. The bulk of this was for “contribution to statutory funds”, of RM2.25 billion. This tendency to overspend beyond what is originally allocated is unhealthy and reflects badly on a government that lacks the fiscal discipline to keep to its original budget.
Second, the annual budget does not shed comprehensive light on the actual amount of debt that is borne by the federal government. The government does publish some of its contingent liabilities, such as federal government-guaranteed debt for government-owned or government-linked companies like Khazanah Nasional and Prasarana Malaysia, and depositors guarantees like the Employees Provident Fund and Lembaga Tabung Haji in its Financial Statement prepared by the Accountant General’s Department. Debt guaranteed by the federal government has grown from RM69.2 billion in 2008 to RM178.06 billion in 2016 – that is a growth of 157%. The largest contributor of these is the National Higher Education Fund Corp (PTPTN).
However, this published data of government guaranteed debt is not part of the budget documents. Neither does the budget include other obligations the federal government would have, including having to step in and bail out debt holders when a privatised entity they hold debt in goes belly up. There are also off-budget agencies that are owned by government ministries whose finances are not captured in the budget. In short, one needs to look beyond the budget itself.
Additionally, implicit liabilities, which are essentially the spending promises made by the federal government that would form obligations for future expenditures, also go unreported in the budget (they are usually not included in usual debt statistics in other countries as well). For example, in the case of 1MDB, apart from explicit guarantees from bonds and loans, some of which may be captured in official documents, there were also implicit guarantees that needed to be accounted for to understand the financial implications it would have on our national coffers which are not published.
Taken together, these other contingent liabilities that are not reported in the budget – both explicit and implicit – ought to be better clarified. Although debt repayment would eventually go back to Malaysian taxpayers since most of these debt liabilities are owed to domestic and not international institutions, it is still challenging to determine a more accurate assessment of Malaysia’s financial position without a disaggregated and detailed breakdown of all debt, which the budget should rightfully contain.
A third and final reason why the budget presentation in Parliament is an insufficient source of information is simply that the prime minister’s speech has been found to contain commitments that are not followed through with in the actual financial documents themselves.
Last year, several Members of Parliament pointed out the inconsistencies between his 2017 speech and what the expenditure document contained; for example, the Serdang MP wrote that “new programmes” in the speech were actually already in existence, while the Bukit Mertajam MP found that mammogram screenings and HPV vaccinations were not budgeted for although they were within the speech text.
No doubt there will be lots of enthusiasm for goodies and tax breaks for what after all is the final budget before the upcoming general election. But if past budgets are anything to go by, it may not be an accurate reflection of the reality. Be ready to scrutinise the document line by line and expect yawning gaps in relevant information that belie the glowing promises.