PM Anwar tables RM386b Budget 2023, most development spending ever

KUALA LUMPUR, Feb 24 — Prime Minister Datuk Seri Anwar Ibrahim will table the largest federal budget to date today, totalling RM386.14 billion as part of efforts to sustain growth and raise social protection against economic headwinds.

The amount is over RM1 billion more than the one tabled by his predecessor Datuk Seri Ismail Sabri Yaakob but was not passed. The sum earmarked for development is also larger by about a billion ringgit, totalling RM96.5 billion or a quarter of the total budget. This will be the country's biggest development expenditure so far.

Anwar had already tabled a partial budget to cover up to RM107 billion in operating expenditure for this year during a special sitting held in December 2022, when he secured a vote of confidence to remove lingering suspicion about the support he has in Parliament.

An additional RM57 billion was also approved under the development fund.

This year's larger development expenditure (devex) comes on the back of expectations that government revenue would drop slightly to RM291.5 billion, or 15.4 per cent of gross domestic product (GDP).

Total revenue collected last year was the equivalent of 25.9 per cent of GDP as the economy rebounded strongly from the pandemic on pent-up demand, driving up better-than-expected tax collection.

The Anwar government said it could reduce operating expenditure largely because of the expiry of Covid-19 fund, recalibration of subsidies and "spending optimisation measures".

Allocation for operating expenditure (opex) is estimated to drop to RM289.1 billion as the new government moves towards targeted subsidies and lower crude prices. The Anwar government said spending for subsidies and social assistance could decrease by about 3 per cent from last year, or RM58.6 billion.

Allocation for emoluments, usually the largest component in operating spending, is projected to take up to 31 per cent of total expenditure, up by 1.4 per cent from last year.

Pension is estimated to take up 10.7 per cent of total opex while debt service charges will take up 15.9 per cent of opex or RM45 billion, up by more than a full percentage point.

Anwar's government said it could still meet its fiscal consolidation target despite increases in some of the components. This year's deficit is expected to drop to around 5 per cent of GDP.

Former prime minister Tan Sri Muhyiddin Yassin's administration borrowed RM230 billion or 12.9 per cent of GDP to fund the 2022 budget and more than half of the gross proceeds from that year were used for principal repayments, the Finance Ministry said in its Budget 2023 report.

About a third of it came from Malaysian Government Securities, at RM86.5 billion or 37.5 per cent of total "borrowings". Total debt as of 2022 stood at RM1.07 trillion.

Under the projected development expenditure, half of the total will go to beef up transport, trade and industry and energy and public utilities, agriculture and environment.

Another 27 per cent will go into social spending, with 14 per cent (RM13.5 billion) on education and training. Healthcare spending will only take up 5.1 per cent of total devex, some RM4.9 billion.

The Ministry of Finance expects this year's growth to moderate to 4.5 per cent, nearly half less than 2022's GDP.