NAJIB, THE FINANCIAL WIZARD

"Buoyed by optimism of higher income, Malaysia is cutting fiscal deficit and subsidies but not letting up in big spending."

IT CALLS for financial wizardry. Last week Najib Razak, Malaysia's Prime Minister, showed the world how his country can spend big and yet cut fiscal deficit as he presented a 251.6-billion ringgit ($81.7 billion) budget for next year amid a weakening global economy.

And he is confident that higher income can be expected from economic growth that will be able to fund populist spending such as cash handouts to the poor.

"We have never painted a pretty picture based on wishful thinking....we make promises, we fulfil them,” Najib, who is also finance minister, told parliament on Friday.

Government revenue is expected to rise to 208.6 billion ringgit from this year’s 207.2 billion ringgit on optimism that the economy will grow between 4.5% and 5.5%. This year’s growth is expected at between 4.5% and 5%.

Thus Najib can trim next year’s fiscal deficit by half a percent to 4%, beating most economists’ forecasts including the 4.2% forecast by the United Overseas Bank. In so doing, he has shown that his government will keep to its target of reducing the budget deficit to 3% by 2015.

Next year’s expenditure is down slightly from this year’s 252.4 billion ringgit despite a proposed higher spending of 15.7 billion ringgit on education, health, welfare, housing, and fighting crime.

Some 1.3m federal civil servants will receive a one-and-a-half month bonus. About 4.3m poor households will receive a second cash handout of 500 ringgit each and 2.7m single people will get 250 ringgit each. These cash handouts will cost the government 3 billion ringgit.

Najib has also introduced measures to cool an overheating housing market. He is raising the real property gain tax (RPGT) by 5% to 15% on sales of properties within five years of their purchase. The government is also spending 1.9 billion ringgit to build 123,000 houses costing between 150,000 and 400,000 ringgit for those earning between 3,000 and 5,000 ringgit a month.

Sabah is getting 2.2 billion ringgit of road projects. About 100m ringgit of them will be offered by year end. It can also expect to get about a quarter of the 140m ringgit to develop a rice bowl on 5,000 hectares in Kota Belud, about 60km from Kota Kinabalu.

There is 386m ringgit for Sabah, Labuan and Sarawak to set up 57 more low-price 1Malaysia people’s shops to help keep consumer prices down.

Najib has reduced sugar subsidy by 20 sen to discourage people from taking too much sugar. Malaysia has 2.6m diabetics. Nevertheless the government is still subsiding sugar at 34 sen per kg which costs it 278m ringgit. It pays 1.5 billion on cooking oil subsidies. However, government subsidies are expect to drop to 37.6 billion ringgit next year from this year’s 42.4 billion ringgit.

Sabah is expected to table its budget for next year soon. And it should mirror that of the federal. State civil servants are expected to get 1.5-months of bonus.

Sabah Chief Minister Musa Aman has welcomed Najib’s budget describing it as “very caring, honest and realistic.” (Insight Sabah)