KUALA LUMPUR - Malaysia will continue to trim a fiscal deficit that has ballooned government debt to RM656 billion (S$218 billion), inching down to 3 per cent of Gross Domestic Product (GDP) next year.
Making a presentation on Budget 2017 in Parliament, Datuk Seri Najib said that the budgetary allocation for the next financial year has been increased by 3.4 per cent from the 2016 Budget Recalibration to RM260.8 billion (S$86.95 billion).
Datuk Seri Najib, who is also finance minister, is targeting a 4-5 per cent economic growth in 2017, likely accelerating from the 4.1 per cent recorded so far this year.
The government projects revenue to recover next year after the net petroleum exporter grappled with 12-year lows in oil prices in January, before seeing the commodity nearly double in value today.
A combination of the oil price crash and damaging allegations that Mr Najib took billions of ringgit from troubled state investor 1Malaysia Development Berhad (1MDB) has weighed down the country's economic prospects, and shrunk the ringgit by 40 per cent against the US dollar.
This will help to unlock operating expenses which had to be cut by a massive 4.5 per cent this year, in order to meet the deficit target of 3.1 per cent. Federal government debt has nearly doubled since Mr Najib took power in 2009.
The premier said "our economic growth remained stable and sustainable during first half of the year" despite global headwinds.
"Indeed, we are now on the right track, as we have and are taking right decisions even though the measures were unpopular. As the saying goes, save for a rainy day, we have laid strong foundations for the country’s long-term financial and economic position," he said when tabling the budget.
Significantly, he announced the fulfilment of the Barisan Nasional (BN) coalition's promise from its 2013 election manifesto to increase the popular BR1M cash handouts to a maximum of RM1,200 per household for lower-income families.
The Budget announcement comes ahead of elections expected next year and due by August 2018.
Out of the total budgetary allocation, RM214.8 billion has been allocated for operating expenditure, while RM46 billion was earmarked for development expenditure.
Mr Najib projected that revenue collection would expand by around 3 per cent to RM219.7 billion in 2017, which would help the government achieve its fiscal deficit target.
Mr Najib, who is also finance minister, is targeting a 4-5 per cent economic growth in 2017, likely accelerating from the 4.1 per cent recorded so far this year.
The Prime Minister said the economy was facing headwinds in the form of external economic uncertainties out of the government's control, with subdued growth among major economies. He revealed that subsidy rationalisation represented 0.24 per cent of the overall budget for 2017.
Keeping to his Barisan Nasional (BN) coalition's promise in the 2013 election to increase the popular 1Malaysia People's Aid (BR1M) cash handouts for lower-income families, Mr Najib said the assistance would be increased to a maximum of RM1,200 per household.
He also announced a slew of perks for civil servants, including loans for the purchase of smartphones, a doubling of the motorcycle loan facility for public servants, and increasing the limits for housing loans, besides extending the fully paid study leave with scholarship scheme to blue collar civil servants.
In another sop, Mr Najib expanded a tax relief scheme providing for a RM2,500 deduction on the purchase of reading materials, computers and sports equipment to also cover the purchase of printed newspapers, smartphones and tablets, Internet subscriptions as well as gymnasium membership fees.
Mr Najib said that according to purchasing power parity, Malaysia was now considered an upper middle-income country, with purchasing power parity per capita increasing from US$23,100 (S$32,197.70) in 2012 to US$26,891 in 2015.
Opposition MPs raised a ruckus during Mr Najib's presentation and held up placards, before walking out of Parliament in protest.
"Without real meaningful reforms and the country's number one kleptocrat doing this, we have to be prepared for harder times ahead," said Parti Keadilan Rakyat vice president Nurul Izzah Anwar, referring to graft claims against Mr Najib.
Mr Najib was expected to unveil further measures to take the sting out of rising cost of living and runaway house prices amid continued grouses over the broad-based 6 per cent Goods and Services consumption tax (GST) he introduced in April last year.