This article first appeared in The Edge Malaysia Weekly on November 9, 2020 - November 15, 2020
THE government is allocating RM322.5 billion for Budget 2021, or 20.6% of the country’s gross domestic product, higher than the previous year’s allocation of RM297 billion.
Operating expenditure (OE) will account for 73.3%, or RM236.5 billion, of the government’s expenditure, while development expenditure (DE) will take up 21.4% of the budget (RM69 billion). In addition, RM17 billion or 5.3% of the amount will be reserved for the Covid-19 Fund.
DE to be channelled to high-impact projects
The government’s 2021 DE in 2021 is 38% higher than last year’s RM50 billion, as projects were deferred during the Movement Control Order period.
According to the Ministry of Finance’s (MoF) Economic Outlook 2021 report, DE will go to programmes and projects with high-multiplier impact to promote economic growth and support the livelihood of the rakyat.
Of the total DE, RM67.3 billion is in the form of direct allocation, while RM1.7 billion will be given out as loans to state governments and government-linked entities.
The health subsector remains a priority and will receive an allocation of RM4.7 billion or 6.8% of total DE. The focus of spending here will be to expand the subsector and provide an effective national healthcare system, according to the report.
More new hospitals and clinics will be built, especially in small districts, to ensure an affordable, equitable and accessible healthcare system.
In addition, outlays will also be provided for the upgrading and maintenance of hospitals and clinics as well as the procurement of medical service vehicles and equipment.
Major ongoing projects under this subsector include the construction of the Serdang Hospital Cardiology Centre, Putrajaya Hospital Endocrine Complex and Lawas Hospital, in addition to the upgrading of Kajang Hospital and Tawau Hospital.
Ministry of Education biggest recipient
The top three recipients under the budget are the Ministry of Education, MoF and Ministry of Health, which will collectively get RM117.5 billion or 38.5% of the budget.
In terms of sectoral allocation (excluding the Covid-19 Fund), 37.7% will be allocated for programmes and projects under the social sector, followed by the economic (18.3%), security (11%) and general administration (7.7%) sectors.
The remainder of the budget, which amounts to RM77.4 billion or 25.3%, will be allocated for charged expenditure and transfer payments.
Civil servants’ emoluments increase to RM84.5 bil
According to the Fiscal Outlook 2021 report, civil servants’ emoluments are estimated to be RM84.5 billion, compared with RM82.61 billion in 2020 and RM80.53 billion in 2019.
The rise in 2021 is mainly due to the provisions for annual salary increments for civil servants. Emoluments take the lion’s share of 35.7% of the government’s OE.
Meanwhile, retirement charges are estimated to increase by 2% to RM27.6 billion, representing 11.7% of total OE.
Subsidies and social assistance drop to RM18.85 billion
Subsidies and social assistance, which comprise subsidies for goods and services, incentives and social assistance, are projected to fall 6.4% to RM18.85 billion from RM20.14 billion in 2020 and RM23.9 billion in 2019. The decline is mainly due to the consolidation of the Bantuan Saraan Hidup and Bantuan Prihatin Nasional cash assistance programmes.
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