KL to tweak Budget in light of 2016 challenges

Changes to include optimising spending as oil price slump continues, says PM Najib

KUALA LUMPUR • Malaysian Prime Minister Najib Razak will table amendments to the 2016 Budget "soon" that will take into account the challenges expected in the new year, state news agency Bernama quoted him as saying yesterday.

Datuk Seri Najib did not specify when the meeting would be tabled.

Amendments to the Budget will have additional measures to optimise spending and the role of government-linked firms, he said, speaking at a meeting with the Ministry of Finance staff.

Mr Najib said inflation this year is expected to stay in the range of 2 to 3 per cent. He added that the government projects economic growth to remain stable at 4 to 5 per cent, a little slower than last year's expected expansion of between 4.5 and 5.5 per cent.

The Prime Minister delivered a popular Budget in October that gave cash to low-income families and taxed the rich. But revenues from oil and gas have continued to slump for South-east Asia's second-largest oil producer amid a drop in global fuel prices.

The 2016 Budget assumed oil prices to be US$48 per barrel. Brent crude was trading at around US$33 a barrel yesterday.

Mr Najib said 2016 will be a challenging year but that the government is committed to upholding the people's welfare and ensuring strong economic growth.

The ringgit slumped more than 18 per cent against the United States dollar last year .

In the meeting, the premier said the 6 per cent goods and services tax (GST) introduced in April last year could be considered the "saviour" of the economy as it helped to bring in revenues for the government amid the shortfall caused by lower oil prices, Bernama reported.

The GST is blamed by the public for causing a rise in the prices of goods and services.

PM Najib, who is also finance minister, said the projected net proceeds from GST at December 2015 are RM27.13 billion (S$8.9 billion).

GST net proceeds this year are estimated to rise to RM39 billion.

"It is not wrong if I were to say that the GST is the saviour of the national financial and economic position as a whole," he told the meeting, as reported by Bernama.

Mr Najib said there would be a shortfall in government revenue of more than RM30 billion if global oil prices remain at between US$32.35 and US$36 a barrel.

"Every US$1 drop in the price will translate into a contraction of RM300 million in government revenue. This is the situation that we are up against, and if there is no GST, the national deficit will rise to 4.8 per cent this year and will no longer be 3.1 per cent," he was reported by Bernama as saying.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 09, 2016, with the headline 'KL to tweak Budget in light of 2016 challenges'. Print Edition | Subscribe