KUALA LUMPUR (Oct 7): The government has budgeted a slightly smaller amount for operating expenditure (OE) in 2023 due mainly to the expectation of less money required for subsidies.

Some RM272.34 billion has been allocated for 2023, which is 4.3% lower compared with RM285.7 billion in 2022 while it was RM231.5 billion in 2021. The 2023 OE is 15% of GDP.

Based on forecast public revenue of RM272.57 billion, the government will be spending all its revenue on OE, of which about 44% is for emoluments for civil servants and pensions totalling RM119.84 billion, according to the  Economic Report released by the Ministry of Finance (MOF). This has been the government's spending pattern for more than 10 years.

Almost all major components of OE have bigger allocations in 2023, except for three items — subsidies and social assistance, supplies and services, and "others", according to the report.

The allocation for subsidies and social assistance has been slashed substantially by 28.7% to RM42.01 billion from RM58.9 billion in 2022 and RM23.04 billion in 2021.

Fuel subsidies are estimated to decline with the expectation of lower global crude oil price in 2023 averaging US$90 per barrel.

The report said the lower allocation is also in line with the gradual move towards targeted subsidies in ensuring economic
efficiency and equitable distribution of resources.

Nonetheless, the government will continue to provide Bantuan Keluarga Malaysia (BKM) assistance aimed at easing the financial burden of the lower income group.

Interestingly, the subsidies and social aids of RM58.9 billion for 2022 reported in the Economic Report is vastly different from the whopping sum of RM77 billion that has been announced to the public over the past months. It is not known how the difference of RM18.1 billion had come about for 2022.

The allocation for "others", the details of which are not known, has been reduced sharply as well to RM7.78 billion in 2023 from RM11.8 billion in 2022 and RM8.5 billion in 2021.

Emoluments for civil servants remain the biggest item accounting for one third of the government's OE in 2023. The amount is estimated to increase by 4.9% to RM90.8 billion. The rise is due to provisions for special annual salary increments and absorption of contract officers to permanent positions. The absorption is estimated to benefit about 5,700 medical officers and 18,100 teachers.

Debt service charges — the second largest component of the OE — are expected to be at RM46.1 billion in 2023, up 7% from RM43.1 billion in 2022, in tandem with higher financing needs for development expenditure (DE) and the Covid-19 Fund.

For more stories on the Economic Report 2022/2023, click here.