September 29, 2012
Federal Government Spending Exceeds Budget but Fiscal Deficit lower, says Treasury Report 2012-2013
However, the government managed to control the deficit of 2012 which is estimated to be 4.5 percent of the GDP, slightly below the initial forecast of 4.7 percent.
Prime Minister cum Finance Minister Najib Abdul Razak has been able to meet the deficit since he took over the office in 2009. This is due to higher estimated revenue this year at RM207.2 billion, an increase of 11.8 percent compared to 2011.
According to the Economic Report 2012/2013, the overspending in 2012 only occurred in the operating expenditure, but not the development expenditure. The operating expenditure is estimated to exceed the initial budget allocation of RM181.6 billion by 11.6 percent to RM2.026 billion, but the development expenditure is estimated to be RM400 million less than the amount in the initial budget of RM51.2 billion, to bring the amount to RM49.8 billion.
According to the report, the largest chunk of operating expenditure is emoluments, which is the salaries for civil servants. It is estimated to increase by 18 percent from RM50.1 billion in 2011 to RM59.2 billion, taking up 29.2 percent of the total operating expenditure.
Less collected from Petronas
The increase is attributed to provisions for improvements in the salary scheme of civil servants of between 7 to 13 percent effective from January 1 this year (RM3.3 billion), adjustments to cost of living allowances ranging between RM150 to RM300 (RM379 million), and a revision in annual increment between RM80 to RM320 according to grade.
In addition, a half month bonus with a minimum payment of RM500 was given to 1.27 million civil servants amounting to RM1.9 billion, and a new promotion scheme implemented for the teachers effective from May 2012 exercise is expected to cost RM1.1 billion in 2012.
Other operating expenditures are subsidies (RM42.4 billion, 20.9 percent of total operating expenditure), supplies and service (RM32 billion, 15.8 percent) and debt service charge (RM20.5 billion, 10.1 percent).
In term of revenue, boosted by an increase in production volume and firm crude oil price, receipts from petroleum income tax (Pita) will be markedly higher at RM32 billion.
To gradually reduce dependence on oil-related revenues, said the report, a lower dividend of RM28 billion was imputed for 2012 from Petronas, compared to RM30 billion in 2011.
“However, due to the fuel cost-sharing mechanism between the government, Petronas and Tenaga Nasional Berhad, dividend for 2012 will decline to RM26.3 billion.”