Budget Revision 2015: What Are The Changes?
Prime Minister Datuk Seri Najib Tun Razak has readjusted Budget 2015 Malaysia with “specific and proactive measures” to ensure sustainable development and resilience of the economy in the face of the changing economic landscape.
The initial Budget 2015, tabled late last year with an expected expenditure of RM273.9bil against an expected revenue of RM235.2bil, was based on global oil prices of US$100-US$105 per barrel. However, oil prices are currently trading below US$50 a barrel.
The Ringgit has fallen some 13.5% since August 2014 to 3.5715 against the US dollar, and is the worst-hit currency in Asia due to plunging crude oil prices.
The country is currently short of RM8.3 billion to sustain the initial Budget 2015. Budget deficit would have risen to 3.9% of GDP compared to the targeted 3%, if the Government does not come up with consolidation measures.
The revisions of the budget are based on a few key factors: a global oil price of US$55 per barrel, achieving a fiscal deficit target of 3.2%, compared to the original 3% and ensuring that our current account is always in surplus.
Key Highlights to the Announcement of Budget Revision 2015
Some key highlights to the announcement of Budget Revision 2015 include reductions such as:
- A reduction of RM5.5 billion from the original amount of RM223.4 billion is for Operating Expenditure, to prioritise only “necessary” expenditures.
- The 2015 National Service Training Programme to be put on hold to save RM400 million. The programme will be reviewed and enhance.
Besides cutting down on the original budget, the Government is focusing increasing national revenue through the following initiatives:
- Free visa for tourists, especially from China, in an effort to boost the tourism industry.
- To boost domestic tourism through competitive pricing of domestic flights.
- Levy rates on foreign workers to be reviewed
- More promotional activities on Malaysian-made products, and extended mega sales period nationwide.
- The RM48.5 billion allocated for Development Expenditure will remain.
- MRT projects, including LRT3 and the High Speed Rail Kuala Lumpur-Singapore project will continue.
- Bank Negara Malaysia to offer RM500mil Special Relief Facility to finance SME loans at lower rates (2.25%) and loan repayment period extended up to six months.
- SME-Go to be introduced via SME Bank, an export programme initiative for SMEs.
- Grants allocated to statutory bodies, GLCs and Trust Funds to be reviewed, saving RM3.2bil
- Industrial electricity tariff rates will not be increased in 2015
A bulk of the revised budget has been allocated to assist some 400,000 flood victims. Total infrastructure damage resulting from the flood is estimated to have hit RM2.9bil. Some efforts the Government has undertaken and will undertake to assist these victims include:
Despite the unease surrounding the weakening Ringgit, the Prime Minister said that the function of the capital market is still continuing in an orderly manner.
Datuk Seri Najib added that the notion of retreating oil prices and a subsequent contraction in export revenue would result in a deficit current account was not true. Effects of plunging oil prices are expected to be offset by an increase in demand for manufacturing goods, which account for 76% of total export, he said.
At the budget revision address, the Prime Minister also said we are not in the same crisis situation as in the years 1997 and 1998, or 2009, where stimulus packages were needed.
With the reduction in the retail price of petrol and diesel by 35 sen and 30 sen, respectively, he said the rakyat’s gross disposal income now stands around RM7.5bil.
The Prime Minister will unveil the 11th Malaysian Plan in May, to outline the development expenditure until 2020.