Anwar’s bizarre budget
Najib Razak one of the biggest beneficiaries of the budget.
Murray Hunter
The 2025 budget is the third budget PM and finance minister Anwar Ibrahim has delivered in the last two years. The first one was a correction of the 2022 budget delivered by Tengku Zafrul under the Ismail Sabri government, and the second one looked to be in some haste.
To some extent, this is the first real Madani budget of his government. What was most striking with this budget is that it was full of illusions to promote particular conclusions.
In the first few minutes of the budget delivery, listeners were told that the budget deficit is expected to decline to just 3.8 percent of GDP. In fact, the projected budget deficit for 2025 is RM 86 billion, which is the 3rd highest yet. This budget will certainly not decrease public debt. On the contrary, it will increase Malaysia’s public debt by a substantial amount. Putting this in Madani terms, public debt will go from some 64 percent of GDP to nearly 70 percent of GDP. Debt service charges are now 13 percent of budget spending. That’s almost RM 44 billion. Back in 2019, debt service charges were 11 percent of government spending. Don’t forget, keeping the budget deficit to just RM 86 billion will require record tax collection of RM 340 billion.
There were so many budget announcements made last Friday, it is taking days to really understand some of them and put them in perspective. Perhaps the biggest loser of the budget will be the M40. Nothing much was done for them, and costs due to the loss of some petrol subsidies may actually make the cost-of-living increase for many of them. Lets also hope the record spending of a whopping RM 421 billion is not a cause of further inflation itself.
Anwar has escaped the need to reintroduce the GST by broadening the SST on goods and services. When these come through, consumers will notice the difference. Anwar has also gone some way into introducing a negative income tax (NIT) approach for the poor. The STR will assist some 4 million people with RM 100 per month.
However, some of the budget is causing great confusion. The new income segment definition T15, has not been fully defined. “Lone opposition member” Syed Saddiq questioned this, saying the critical term to understanding some of the implications of the 2025 budget hasn’t even been fully defined yet. Rafizi Ramli confused things more by saying the T15, which subsidies may be geared around will not depend solely on gross household income.
Such important terms should be defined either before or during the budget. Be prepared for lots of anomalies and mishaps when petrol subsidies are phased-out.
The most perplexing part of the budget is the large number of small or minor programs across the board in areas like education, and SME development. Programs to revitalise school infrastructure and digital and e-commence programs just don’t have enough funds to benefit many. Strict eligibility criteria will decide who gets the money, which will be beyond any transparency.
Lots of money is going into ESG and green financing. However, the budget doesn’t provide any TORs or expected outcomes. So, there are questions here. Who will get money? For what? What is expected to be achieved? Let’s hope this ESG doesn’t become just another rort for cronies.
SMEs are concerned with the government rising the minimum wage from RM 1,500 to RM1,700. This is going to add substantial costs to many SMEs and end up costing jobs in this sector. This rise could have come with some financial incentives to SMEs in some ‘job building’ programs to make the rise sustainable.
By far the most bizarre part of the budget was the major change announced in prison punishment and sentencing policy – introducing new legislation for home detention. Its just difficult to see what it actually has to do with the budget.
While Anwar, as well as the rest of his government is avoiding any discussion on the most significant change to the way the nation is governed, through the Mufti Bill, he used the budget as an opportunity to set the stage for home detention of former prime minister Najib Razak, who is languishing in the lodgings of the superintendent of Kajang Prison. Home minister Saifuddin Nasution Ismail, was quick to take up the running to promote the need for such important legislation, that was oddly mentioned in the budget speech. Saifuddin event admitted the bill has already being prepared.
In addition to being perplexed as to why such a measure would even be in the budget speech, its strange even such a bill would be required, when the Department of Prisons already has the power to place a person in home detention.
It really appears the announcement in the budget speech was just for opportunistic reasons.
The Malaysian M40 will be pleased to know that at least Najib Razak walked away a winner from Anwar’s 2025 budget. They certainly didn’t.
The irony is that Najib when he delivered his budget speech to the dewan Rakyat got laud applause for his initiatives. In contrast, Anwar got weak lacklustre reactions last Friday.
