The Malaysian Insight

BUDGET 2022 will be RM332 billion, the largest annual government spending plan to be tabled in Malaysia’s history, with more allocated to the Health Ministry than previously.

It exceeds Budget 2021 which was RM323 billion, and will account for 20.3% of gross domestic product (GDP), according to the federal government’s 2022 Financial Outlook report.

As with previous years, operating expenditure will account for the bulk of spending at RM234 billion (2021: RM 219.6 billion).

The lion’s share of this is taken up by emoluments, debt service charges and retirement charges for civil servants.

“Emoluments for civil servants account for the largest share of the expenditure in 2022, about a third in total, is estimated to increase to RM86.5 billion.

“The increase is partly to cater for the annual salary increment. Likewise, the retirement charges are estimated to increase to RM28.1 billion (12%) due to the annual pension increment, coupled with a higher number of pensioners and beneficiaries estimated at about 628,300,” the report said.

A total of RM 43.1 billion will be allocated for debt service charges, whereby 98.2% will go into coupons on domestic debts, while the balance will be for offshore loans.

“The debt service charges ratio to operational expenditure is estimated higher at 18.5% in line with the use of debt instrument in financing an expansionary stance,” the report added.

Funding for supplies and services will be 30.5% higher at an estimated RM30.4 billion. The increase is due to higher outlays for medical supplies as well as funding for professional services.

Health Ministry to receive highest allocation

The Health Ministry will receive the largest allocation at 33.1%, followed by the Home (12.5%) and Education (11.2%) Ministries.

For 2021, the allocation for the Health Ministry was 31.9%.

Other components of operational expenditure for 2022 include subsidies and social assistance (RM17.4 billion) and grants to statutory bodies (RM14.1 billion).

Development expenditure

Development expenditure will also be increased to RM75.6 billion, from RM62 billion last year.

The economic sector will be the largest recipient with RM40.2 billion or 53.2% of total, followed by the social sector with RM22.7 billion (30%).

In the social sector, education and training will get RM12 billion, health will get RM4.5 billion and RM1.8 billion will go into housing, which includes building more PPR houses and upgrading civil servants quarters.

The security sector will receive RM9 billion (11.9%) and RM3.8 billion will go towards general administration (4.9%).

In the economic sector, transport will receive RM15.5 billion, trade will receive RM2.1 billion, public utilities will get RM3.2 billion, agriculture RM2.9 billion, and environment RM2.1 billion.

2021 expenditure recalibration

Following the disbursement of the Permai, Pemerkasa, Pemerkasa+ and Pemulih economic stimulus packages to mitigate the impact of Covid-19, revenue was below projection for budget estimates, the report also noted.

The stimulus packages amounted to RM225 billion with a direct financial injection of RM25 billion.

As such, total expenditure for the year was recalibrated to RM321 billion.

The recalibration involved the net reduction of RM 1.9 billion in expenditure, which resulted in savings of RM23.9 billion, of which RM22 billion was redirected to finance additional direct injection to the Covid-19 fund.

The savings were recognised through deferment of certain programmes and projects, suspension of non-critical programmes, revision of allocations for budget measures and shortfall in spending due to delays in implementing projects as a result of the movement curbs.

Operational expenditure for 2021 was revised 7.1% lower to RM219.6 billion from the original allocation of RM237 billion, while development expenditure was revised to RM62 billion from RM69 billion. – October 29, 2021.