Pua: Budget 2016 figures don’t read right

Prime Minister Najib Abdul Razak failed to provide a credible plan for the government against all contingencies arising as a result of 1MDB.

KUALA LUMPUR: Budget 2016 will not only fail to lift local and international investor confidence, it will be another non-event which will soon be overshadowed by the multi-billion ringgit scandals of the Najib administration, said Petaling Jaya Utara MP Tony Pua in an initial reaction.

The Budget for 2016, just announced by the Prime Minister, was long on grandiloquence and short on substance, charged Pua who is also DAP National Publicity Secretary and DAP Selangor Chairman.

The consequence in the failure of the Federal Government to be prudent in spending can be reflected in the increase in Federal Government debt from RM582.8 billion in 2014 to an expected RM627.5 billion by the end of 2015, said Pua. “The increase in Federal Government debt by 7.7 per cent also significantly outpaced the growth of Malaysia’s GDP at only 4 to 5 per cent per annum.”

“Prime Minister and Finance Minister Najib Abdul Razak failed to tackle the extremely damning and damaging allegations against 1MDB and provide a credible plan for the government against all contingencies arising as a result of the company.”

For all the language of bravado peppered in the entire Budget speech, said Pua, Najib failed to deal with the key issues which have shattered domestic and international confidence in his administration.

“The Prime Minister did not see it fit, to take on the two massive elephants in the room, the RM42 billion 1MDB scandal and the RM2.6 billion purported ‘donation’ in his personal bank account which also involved a Finance Ministry subsidiary, SRC International Sdn Bhd.”

Briefly, the Federal Government has already extended an emergency RM975 million in February this year, a “letter of support” to obtain a USD150 million loan from EXIM Bank, and indemnified International Petroleum Investment Corporation (IPIC) for a USD1 billion advance to 1MDB. “The inability of 1MDB to repay its debts and the realization of the above contingent liabilities will have serious consequences to the government finances and will naturally create a negative domino effect to the rest of the economy.”

Based on the Federal Government Financial Statements 2014, he added, its contingent liability arising from government guarantees will increase from RM157.5 billion in 2014 to RM172 billion in 2015. “The resulting 9.2 per cent increase is at an even faster rate than the rising Federal Government debt.”

“This shows that the government is shifting an even larger percentage of expenditure to ‘off-budget’ to hide its inability to keep a lid on its expenditure.”

Najib embellished his budget announcement with several mega project announcements including RM28 billion for the proposed MRT2 line, the Pan Borneo Highway and other infrastructure projects, said Pua. “These projects were just recycled announcements from last year’s 2015 Budget.”

“The Finance Minister ignored the fact that these projects are funded by off-budget financing which isn’t reflected in the official budget.”

These off-budget measures make a complete mockery of the Prime Minister’s boast that the Budget deficit will be further reduced from 3.2 per cent in 2015 to 3.1 per cent in 2016. “The projected deficit does not take into consideration that the off-budget expenses funded by government guaranteed borrowings will ultimately be borne by the Federal Government.”

Pua argued that Budget 2016 adds further burden on the rakyat as debts rise faster than economic growth while the Prime Minister ignores the two biggest elephants in the room. “The Malaysian economy faces a slowing global economic environment, declining commodity prices, rising inflation and a plunging ringgit.”

The Prime Minister praised his government for its far-sightedness to introduce the Goods & Services Tax (GST) on the grounds that the income from the new tax will make up for the loss of revenue from the oil and gas sector, noted Pua.

“The reality is that Malaysians, particularly the middle and lower income population, are now burdened with coughing up RM39 billion of GST relative to the loss of RM17.5 billion from the Petroleum Income Tax.

In comparison, he said, the Sales and Services Tax (SST) collected in 2014 amounted to only RM17 billion. “This means that Malaysians have to suffer an increase in taxes by a whopping RM22 billion.”

While the taxes paid by the man-on-the-street have increased drastically, the Federal Government has failed to increase its prudence on expenditure, he said. As an example, he said, the budgeted expenditure for ‘Supplies and Services’ has been maintained at RM36.3 billion for 2016 when it was only RM20.8 billion in 2010. “Why has this provision increased by 75.4 per cent in just 5-6 years?”