This article first appeared in The Edge Malaysia Weekly on October 30, 2017 - November 5, 2017

MALAYSIANS may benefit from the government’s increased expenditure on subsidies and social assistance estimated for 2018, after being hit with projected cuts this year following the removal of subsidies on cooking oil and fuel.

The Finance Ministry says in the Economic Report 2017/18 that the federal government’s operating expenditure (opex) on subsidies and social assistance is expected to increase 15% to RM26.54 billion (accounting for 11.3% of total opex) in 2018, from RM23.09 billion (10.5%) projected for 2017.

Subsidies and social assistance include subsidies for goods and services, incentives and social assistance. In 2016, it stood at RM24.69 billion, accounting for 11.7% of the total opex.

According to the report, 2017 may see a decline in the expenditure for subsidies and social assistance due to two measures that were implemented. One is the rationalisation of cooking oil subsidy for one to five kg bottles, and the other is the weekly-managed float system for fuel prices to minimise the lag effect of daily crude oil prices.

These measures are expected to contribute to savings of approximately RM1.2 billion in 2017, the report says.

“Nevertheless, the government continues to provide targeted subsidies, incentives and welfare assistance, particularly for the agriculture, transportation, education and health sectors.”

It highlights that there has been an increase in the 1Malaysia People’s Aid (BR1M) payment, in line with the shift towards targeted social assistance.

BR1M has been increased up to RM1,200 for eligible households, and a sum of RM6.6 billion is estimated to be disbursed to 7.2 million recipients, both households and individuals, it adds.

For 2018, the Ministry of Finance has budgeted a total of RM234.25 billion for the federal government’s opex, up 6.5% from RM219.91 billion estimated for 2017.

Emoluments are expected to remain the largest component of government opex at RM79.15 billion or 33.8% of the total, followed by supplies and services at RM33.62 billion (14.4%), debt service charges at RM30.88 billion (13.2%), subsidies and social assistance at RM26.54 billion (11.3%), as well as retirement charges at RM24.55 billion (10.5%) amongst others.

As a whole, the federal government’s budgeted expenditure for 2018 is 5.4% higher at RM280.2 billion, compared with RM265.9 billion in 2017. Of this, RM234.2 billion (83.6%) is assigned for opex, while the balance of RM46 billion (16.4%) is set aside for development expenditure.

This compares with 2017’s estimated opex and development expenditure of RM219.9 billion (82.7%) and RM46 billion (17.3%).

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